P.12.12 Hinduja Health Centre (HHC) runs three programmes: (1) alcoholic rehabilitation, (2) drug addict rehabilitation, and (3) aftercare (counseling and support of patients after release from a mental hospital). The HHC's budget for current year follows: j15 Professional salaries: 4 physicians x 3,00,000 18 psychologists x 31,50,000 20 nurses x 360,000 Medical supplies General overhead (administrative salaries, rent, utilities, etc.) 12.00.000 27,00.000 12.00.000 51,00,000 3,00.000 8,80,000 62,80,000 Dr. Anupam Verma, the Director of the HHC, is keen on determining the cost of each programme. He has compiled the following data describing employees allocations to individual programmes: Alcohol Drug Aftercare Total employees Physicians 4 4 Psychologists 8 4 18 2 Nurses 6 10 20 Eight patients are in residence in the alcohol programme, each staying for about six months. Thus, the clinic provides 40 patient-years of service in the alcohol programme. Similarly, 100 patients are involved in the drug programme for about six months each. Thus, the clinic provides 50 patient-years of service in the drug programme. Dr Verma has recently become aware of activity-based costing as a method to refine costing systems He asks his accountant, Kulkarni, how he should apply this new technique. Kulkarni obtains the follow- ing information: (a) Consumption of medical supplies depends on the number of patient-years. (b) General Overhead Costs consist of Rent and clinic maintenance Administrative costs to manage patient charts, food, laundry Laboratory services Total 21.80,000 6,00,000 1,00,000 8,80,000 (c) Other Information about Individual Departments: Alcohol Drug Aftercare Total employee 12.000 30.000 Square feet of space occupied by each programme Patient years of service Number of laboratory tests 9,000 40 400 9,000 50 1,400 60 70 150 2.500 REQUIRED: 1. Using an activity-based costing approach to cost analysis, calculate the cost of each programme and the cost per patient-year of the alcohol and drug programmes. What benefits can HHC obtain by implementing the ABC system? 2. What factors, other than cost, do you think HHC should consider in allocating resources to its programmes