Problem 1. ABC, in health care. Crosstown Health Center runs two programs: drug addict rehabilitation and aftercare (counseling and support of patients after release from a mental hospital). The center's budget for 2014 follows. Professional salaries: 4 physicians x $150,000 12 psychologists x $75,000 16 nurses x $30,000 Medical supplies Rent and clinic maintenance Administrative costs to manage patient charts, food, laundry Laboratory services Total $600,000 900,000 480,000 $1,980,000 242,000 138,600 484,000 92,400 $2,937,000 Kim Yu, the director of the center, is keen on determining the cost of each program. Yu compiled the follow- ing data describing employee allocations to individual programs: Aftercare Total Employees 4 12 16 Physicians Psychologists Nurses Drug 4 4 8 6 10 Yu has recently become aware of activity-based costing as a method to refine costing systems. She asks her accountant, Gus Gates, how she should apply this technique. Gates obtains the following budgeted information for 2014: Drug Aftercare Total Square feet of space occupied by each program 9,000 12,000 21,000 Patient-years of service 50 60 110 Number of laboratory tests 1,400 700 2,100 Required: a. Selecting cost-allocation bases that you believe are the most appropriate for allocating indirect costs to programs, calculate the budgeted indirect cost rates for (1) medical supplies; (2) rent and clinic maintenance; (3) administrative costs for patient charts, food, and laundry; and (4) laboratory services. b. Using an activity-based costing approach to calculate the budgeted cost of the "Drug" program, as well as the budgeted cost per patient-year of the drug program.