Problem 2-20 (Algo) Plantwide versus Multiple Predetermined Overhead Rates: Service Industry [LO2-1, LO2-2, LO2-3, LO2-4] McCullough Hospital uses a job-order costing system to assign costs to its patients. Its direct matenlals include a variety of items such as pharmaceutical drugs. heart valves, artificial hips, and pacemakers its direct labor costs ( cg, surgeonis, anesthesiologists, radiologists, and nurses) associated with specific surgical procedures and tests are traced to individual patients. All other costs, such as depreciation of medical equipment, insurance, utilities, incidental medical supplyes, and the labor costs associated with around-theclock mantoring of patients are treated as overhead costs. Historically. Mc Cullough has used one predetermined overhead rate based on the number of patient-days (each night that a patient spends in the hospital counts as one patient-day) to allocate overhead costs to patients. For the most recent period, this predetermined rate was based on three estumates-fixed overbead costs of $17,240,000, varlable overhead costs of $110 per patientday and a denominator volume of 20,000 patient-days Recently a member of the hosptal's accounting staff has suggested using two predetermined overhead rates follocated based on the number of patient-days) to improve the accuracy of the costs allocated to patients. The first overhead tate would include all overhead costs within the intensive Care Unat (ICU) and the second overhead rate would include all Other overhead costs. Information pertaining to these two cost pools und two of the hospital's patients-Patient A and Pattent B-is provided below: Required: 1Assuming McCullough continues to use only one predetermined overhead rate, calculate: a. The predetermined overhead rate b. The total cost, including direct materials, direct labor, and applied overhead, assigned to Patient A and Patient B. 2. Assuming McCullough calculates two overhead rates as recommended by the staff accountant, calculate: a. The ICU and Other overhead tates. b. The total cost, induding direct materials, direct labor, and applied overhead, assigned to Patient A and Patient B. (Round "Predetermined overhead rate" to 2 decimal places. Round other intermediote calculations and final answers to the nearest dolior amount) 1Assuming Mccullough continues to use only one predetermined overhead rate, calculate: a. The predetermined overhead rate. b. The total cost, including direct materials, direct labor, and applied overhead, assigned to Patient A and Patient B. 2. Assuming McCullough calculates two overhead rates as recommended by the staff accountant, calculate: a. The ICU and Other overhead rates. b. The total cost, including direct materials, direct labor, and applied overhead, assigned to Patient A and Patient B. (Round "Predetermined overhead rate" to 2 decimal places. Round other intermpdiate calculations and final answers to the nearest dollor omount)
