Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

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

image text in transcribedimage text in transcribed

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).. ....... ............................................ 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. Required: Using the facts from the case, please respond to the following independent questions and show all workings: a. Assuming that the number of patient-days was the only cost driver, determine the profitability for each of the three procedures. 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.]' Using the activity drivers determined in Part b. above, determine the profitability for each of the three procedures. d. Why are the results obtained in Part c. different from those obtained in Part a.? Please explain

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access with AI-Powered Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Intermediate Accounting

Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield, Nicola M. Young, Irene M. Wiecek, Bruce J. McConomy

11th Canadian edition Volume 2

1119048540, 978-1119048541

Students also viewed these Accounting questions