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P19-29. ABC-A Service Application Grand Haven is a senior living community that offers a full range of services including independent living, assisted living, and skilled
P19-29. ABC-A Service Application Grand Haven is a senior living community that offers a full range of services including independent living, assisted living, and skilled nursing care. The assisted living division provides residential space, meals, and medical services (MS) to its residents. The current costing system adds the cost of all of these services (space, meals, and MS) and divides by total resident days to get a cost per resident day. Recognizing that MS tends to vary significantly among the residents, Grand Haven's accountant recommended that an ABC system be designed to calculate more accurately the cost of MS provided to residents. She decided that residents should be classified into four categories (A, B, C, D) based on the level of services received, with group A representing the lowest level of service and D representing the highest level of service. Two cost drivers being considered for measuring MS costs are number of assistance calls and number of assistant contacts. A contact is registered each time an assistance profes- sional provides medical services or aid to a resident. The accountant has gathered the following data for the most recent annual period: Resident Classification A B Annual Resident Days 18,000 10,000 5,500 3,000 36,500 Annual Assistance Hours 9,100 22,500 23,000 18,400 73,000 Number of Assistance Contacts 27,000 31,000 27,500 24,000 109,500 Other data Total cost of medical services for the period... Total cost of meals and residential space.. $4,927,500 $2,591,500 Required (round answers to the nearest dollar): a. Determine the total cost of a resident day using the current system. b. Determine the ABC cost of a resident day for each category of residents using assistance hours as the cost driver for medical services and resident days as the cost driver for meals and residential space. c. Determine the ABC cost of a resident day for each category of residents using assistance contacts as the cost driver for medical services and resident days as the cost driver for meals and residential space. d. Which cost driver do you think provides the more accurate measure of the cost per day for a Grand Haven resident
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