Problem 17-5A (Algo) Activity-based costing for a service company LO P4

Optimal Health is an outpatient surgical clinic. The clinics three activities, their overhead cost, and their cost drivers follow.

Activity	Budgeted Cost	Activity Cost Driver	Budgeted Activity Usage
Supplies	$ 2,520,000	Surgical hours (SH)	10,000
Patient services	39,000	Number of patients	600
Building cost	441,000	Square feet	3,500

The two main surgical units and their actual activity usage follow.

Service	Actual Activity Usage
	Surgical Hours	Patients	Square Feet
General surgery	4,000	450	800
Orthopedic surgery	6,000	150	2,700

Required: 1. Compute activity rates using activity-based costing. 2. Allocate overhead cost to the general surgery and to the orthopedic surgery units. Compute overhead cost per patient for each surgery unit.

1. Compute activity rates using activity-based costing. \begin{tabular}{|l|l|l|l|l|l|l|} \hline Activity & Budgeted Cost & \multicolumn{1}{|c|}{ Budgeted Activity Usage } & \multicolumn{2}{|c|}{ Activity Rate } \\ \hline Supplies & & & & \\ \hline Patient services & & & & \\ \hline Building cost & & & \\ \hline \end{tabular} 2. Allocate overhead cost to the general surgery and to the orthopedic surgery units. Compute overhead cost per patient for each surgery unit. General surgery