Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Historically, McCullough has used one predetermined overhead rate based on the number of patient-days (each night that a patient spends in the hospital counts as
Historically, McCullough has used one predetermined overhead rate based on the number of patient-days (each night that a patient spends in the hospital counts as one patient-day) to allocate overhead costs to patients. For the most recent period, this predetermined rate was based on three estimatesxed overhead costs of $17,640,000, variable overhead costs of $110 per patient- day, and a denominator volume of 20,000 patient-days. Recently a member ofthe hospital's accounting staff has suggested using two predetermined overhead rates (allocated based on the number of patient-days) to improve the accuracy of the costs allocated to patients. The first overhead rate would include all overhead costs within the Intensive Care Unit (ICU) and the second overhead rate would include all Other overhead costs. Information pertaining to these two cost pools and two of the hospital's patientsPatient A and Patient Bis provided below: ICU Other Total Estimated number of patient-days 2,808 18,808 20,808 Estimated fixed overhead cost $ 3,244,800 $ 14,396,800 $ 17,640,800 Estimated variable overhead cost per patient-day $ 235 $ 95 Patient A Patient B Direct materials $ 5,688 $ 7,308 Direct labor $ 27,758 $ 38,208 Total number of patient-days (including ICU) 14 21 Number of patient-days spent in ICU 8 7
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started