Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

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,

image text in transcribed
image text in transcribed
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, artifial hips, and pacemakers its direct labor costs (e g, 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-theclock monitoring of patients are treated as overhead costs. Historically, McCullough has used one predietermined 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 estimates-fxed overhead costs of $17,440,000, variable overhead costs of $110 per patient. day, and a denominotor volume of 20,000 patient-days. Recently a member of the hospital's accounting staff has suggested using two predetermined overhead rates (allocated based on the number of potient-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 patients-Patient A and Patient B-is provided below number of patient-dfys) 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 patients - Patient A and Patient B-is provided befow: Required: 1. Assuming McCullough continues to use only one prectetermined 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 caiculates two overhead rates as recommended by the staff accountant, calculote: 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. Note: Round "Predetermined overhead rate" to 2 decimal places, Round other intermediate calculations and final answers to the nearest dollar amount

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Werte Controlling Zur Ber Cksichtigung Von Wertvorstellungen In Unternehmensentscheidungen

Authors: Bernhard Hirsch

2002nd Edition

3824476568, 978-3824476565

More Books

Students also viewed these Accounting questions

Question

Write a short note on rancidity and corrosiveness.

Answered: 1 week ago