Problem $3-22($Algo$)$ Plantwide versus Multiple Predetermined Overhead Rates: Service Industry $[$LO$3-1,$

LO$3-2,$ LO$3-3,$ LO$3-4]$

McCullough Hospital uses a job$-$order costing system to assign costs to its patients. Its direct materials include a varlety of items such

as pharmaceutical drugs, heart valves, artificial hips, and pacemakers. Its direct labor costs $($e$.$g$.,$ surgeons, anesthesiologists,

radiologists, and nurses$)$ assoclated with specific surgical procedures and tests are traced to Individual patients. All other costs, such

as depreciation of medical equipment, insurance, utilitles, incidental medical supplies, and the labor costs associated with around$-$the$-$

clock monitoring of patlents are treated as overhead costs.

Historically, McCullough 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 patlent$-$day$)$ to allocate overhead costs to patlents. For the most recent period, this

predetermined rate was based on three estimates$-$fixed overhead costs of $$17,680,000,$ varlable overhead costs of $$110$ per patlent$-$

day, and a denominator volume of $20,000$ patlent$-$days.

Recently a member of the hospital's accounting staff has suggested using two predetermined overhead rates $($allocated based on the

number of patient$-$days$)$ to improve the accuracy of the costs allocated to patlents. The first overhead rate would include all overhead

costs within the Intensive Care Unit $($ICU$)$ and the second overhead rate would Include all Other overhead costs. Information pertaining

to these two cost pools and two of the hospital's patients$-$Patlent A and Patlent B$-$is provided below:

Required:

Assuming 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 Patlent A and Patient B$.$

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 materlals, direct labor, and applied overhead, assigned to Patlent A and Patlent B$.$

Note: Round "Predetermined overhead rate" to $2$ decimal places. Round other Intermedlate calculations and final answers to the

nearest dollar amount. Historically, McCullough 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 perlod, this

predetermined rate was based on three estimates$-$fixed overhead costs of $$17,680,000,$ varlable overhead costs of $$110$ per patlent$-$

day, and a denominator volume of $20,000$ patlent$-$days.

Recently a member of the hospital's accounting staff has suggested using two predetermined overhead rates $($allocated based on the

number of patlent$-$days$)$ to improve the accuracy of the costs allocated to patients. The first overhead rate would include all overhead

costs within the Intensive Care Unit $($ICU$)$ and the second overhead rate would Include all Other overhead costs. Information pertaining

to these two cost pools and two of the hospital's patients$-$Patlent A and Patlent B$-$Is provided below:

Requlred:

Assuming McCullough continues to use only one predetermined overhead rate, calculate:

a$.$ The predetermined overhead rate.

b$.$ The total cost, Including direct materlals, direct labor, and applied overhead, assigned to Patlent A and Patient B$.$

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 materlals, direct labor, and applied overhead, assigned to Patlent A and Patient B$.$

Note: Round "Predetermined overhead rate" to $2$ decimal places. Round other Intermedlate calculations and final answers to the

nearest dollar amount.