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lancaster orthopedics specializes in hlp, knee, and shoulder replacement surgery. In aditien to the actual surgery, the company patients with preoperative and postoperative inpatient care
lancaster orthopedics specializes in hlp, knee, and shoulder replacement surgery. In aditien to the actual surgery, the company patients with preoperative and postoperative inpatient care in a fully surgical procedure they perform. company pro Lancaster pays its surgeons a fixed fee for each The company the company's costing system, which uses a single overhead rate charged to the patient. the company uses an allocation rate of 65% of the surgical fee n that the current system is producing Inaccurate costs and profitability for the joint replacement Managers nave expressed As a result, Bree Lancaster, the company's initiate systen. She has collected the following data on each of the procedures. s controller, initiated a study to explore the potential for implementing an activity-based costing Hip Knee Shoulder Fee charged to patient Number of procedures per year Average time per procedure Number of procedures per operating room session Inpatient days per procedure Surgeon's fee per procedure Medical supplies per procedure $8,000 $10,000 $6,000 2.0 hours 1.2 hours 1.5 hours $1,200 $1,800 $1,500 $400 $200 $300 After analyzing the company's support activities, Bree determined that five activity cost pools would be sufficient for the company. The proposed activity cost pools, along with the proposed cost drivers, are presented below Activity Operating room preparation Operating room use Nursing and ancillary services Administration Miscellaneous Cost Drliver Total Cost Number of sessions$864,000 Procedure time 1,449,000 5,415,000 1,216,000 936,000 $9,880,000 Inpatient days Sales revenue Number of procedures ting overhead. (Enter negative Calculate the profit per procedure for each of the three procedures using the current basis for alloca Knee Shoulder Hip Profit/ (Loss)
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