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Proper Care Health System wishes to determine the product costs of the three procedures that it performs. Its overhead has been separated into the following
Proper Care Health System wishes to determine the product costs of the three procedures that it performs. Its overhead has been separated into the following three major activities that, along with their activity costs, are revealed below. Activities Activity Costs Scheduling and admitting...............$72,000 Housekeeping $685,000 Nursing .......... $635,260 Total $1,392,260 The following activity drivers, along with their expected usage, are shown below: Activity drivers Expected activities Weighted care units ......................38,500 Number of patients ..............................1,610 Number of patient-days......................5,750 Proper Care Health collected patient information for these three procedures as shown below: Procedure A Procedure B Procedure C Number of patients ........... .........210 .............. 500............... 900 Average length of stay (days). ............................... 4..................... 3 Hence, patient-days.. .................1,050 ............. 2,000.............. 2,700 Weighted care units ..........................15,000 ............. 4,500............ 19,000 Private insurance reimburses the hospital for all three procedures at a fixed daily rate of $300 per patient-day. b. Using activity-based costing, choose an activity driver for each of the three activities and explain why you chose them. (Hint: Please provide three paragraphs, one for each activity. Now, for each activity, you need to designate the activity driver you chose, the reasons why you chose it and the reasons why the other activity drivers were not as good as the one you chose.)
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