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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
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 * $150,000 $600,000 12 psychologists * $75,000 900,000 16 nurses x $30,000 480,000 $1,980,000 Medical supplies 242,000 Rent and clinic maintenance 138,600 Administrative costs to manage patient charts, food, laundry 484,000 Laboratory services 92,400 Total $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: Drug Aftercare Total Employees Physicians Psychologists 12 Nurses 10 16 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
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