Kabwe Medical Centre is a specialised medical facility that treats out patients in three areas of treatment, namely, Gynaecology, Paediatrics, and Specialised Radiology. The consultation fees per patient for Gynaecology, Paediatrics and Specialised Radiology are K400 K500 and K600 respectively. The Management Accountant has compiled the following information about each of the three units: 

Gynaecology

Paediatrics

Specialised Radiology

Number of Patients

10 000

15 000

18 000

Floor Area

240sqm

260sqm

200sqm

Number of Doctors

2

3

4

Number of IT support visits

12

4

24

Additionally, an individual support division services these three units. The following activities, with the associated costs, have been identified:

Overhead Cost

Overhead Allocation Base

Rent

K250 000

Floor Area

Utilities

K100 000

Number of patients

IT Support

K1,500,000

Number of support visits

Billing

K400 000

Revenues

Cleaning

K150 000

Floor Area

Office Administration

K750 000

Number of Doctors

The following costs can be traced to each of the three units in a convenient manner:

Gynaecology

Paediatrics

Specialised Radiology

Medical Supplies:

K100 000

K55 000

K250 000

Salary of Doctors:

K1,500,000

K1,900,000

K2 500 000

Other

K150 000

K200 000

K450 000

Questions:

A.Using number of patients as an allocation base, calculate the total cost assigned to each of the three units using simple costing [5 Marks]

B.Calculate the total cost assigned to each of the three units using Activity Based Costing [33 Marks]

C.Suppose that the office manager decides to hire a cleaner for each of the three units. The cleaning cost per unit are K75 000, K85 000 and K140 000 for the Gynaecology, Paediatric and Radiology units respectively. Calculate the total cost assigned to each of the units using Activity Based Costing. [6 Marks]

D.Calculate the operating income of each unit using Simple Costing and Activity Based Costing assuming that the cleaning costs can be traced to each of the units. Briefly comment on your profitability analysis of each of the three units [12 Marks]