McCullough Hospital

pue iso penal Extra Credit 1 Due: Thursday, October 10 at the BEGINNING OF CLASS Potential Points: 10 DAS McCullough Hospital uses a job-order costing system to assign costs to its patients. Its direct materials include a variety of items such as pharmaceutical drugs, heart valves, artificial hips, and pacemakers. Its direct labor costs e.a. surgeons, anesthesiologists, radiologists, and nurses associated with specific surgical procedures and tests are traced to individual patients. All other costs, such as depreciation of medical equipment, insurance, utilities, incidental medical supplies and the labor costs associated with around the clock monitoring of patients are treated as overead costs determined overhead rates and Historically. McCullough has used one predetermined overhead rate based on the number of ich night that a patient spends in the hospital counts as one patient overhead costs to patients. Recently a member of the 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 the beenital's estimated number of patient-days, its estimated overhead costs, and two of its patientsPatient A and Patient is provided below. The first overhead ra. ICU 2,000 $ 3,200,000 236 Total 20,000 17,200,000 Other 18,000 14,000,000 96 Estimated number of patient-days Estimated fixed overhead cost Estimated variable overhead cost per patient-day $ $ $ Patient A $ 4,500 $ 25,000 Patient B $ 6.200 $ 36,000 Direct materials Direct labor Total number of patient-days (including ICU) Number of patient-days spent in ICU 14 21 Required: 1. Assuming McCullough uses only one predetermined overhead rate, calculate: a. The predetermined overhead rate. b. The total cost, including direct materials, direct labor and applied overhead, assigned to Patient A and Patient B. 2. Assuming McCullough calculates two overhead rates as recommended by the staff accountant, calculate: a. The ICU and Other overhead rates. b. The total cost, including direct materials, direct labor and applied overhead, assigned to Patient A and Patient B. 3. What insights are revealed by the staff accountant's approach