QUESTION 3 (56 Marks] ACTIVITY BASED COSTING Kabwe Medical Centre is a specialised medical facility that treats out patients in three areas of treatment, namely, Gynaecology, Paediatrics, and Specialised Radiology. The consultation fees per patient for Gynaecology, Paediatrics and Specialised Radiology are K400 K 500 and 5600 respectively. The Management Accountant has compiled the following information about each of the three units: Gynaecology Paediatrics Specialised Radiology Number of Patients 10 000 15 000 18 000 Floor Area 240sqm 240 sqm 260sqm 200sqm Number of Doctors 2 14 Number of IT support visits 12 24 Additionally, an individual support division services these three units. The following activities, with the associated costs, have been identified: Overhead Cost Overhead Allocation Base Rent K 250 000 Hoor Area Utilities K 100 000 Number of patients IT Support KI 500 000 Number of support visits Billing K 400 000 Revenues Cleaning K 150 000 Floor Area Office Administration K 750 000 Number of Doctors The following costs can be traced to each of the three units in a convenient manner: Gynaecology Paediatrics Specialised Radiology Medical Supplies: K100 000 K55000 K250 000 Salary of Doctors: K1 500 000 K1 900 000 K2 500 000 Other K 150 000 K200000 K450000 Page 4 of 6 Questions: A. Using number of patients as an allocation base, calculate the total cost assigned to each of the three units using simple costing 15 Marks] B. Calculate the total cost assigned to each of the three units using Activity Based Costing [33 Marks] C. Suppose that the office manager decides to hire a cleaner for each of the three units. The cleaning cost per unit are K75000, K85 000 and K 140 000 for the Gynaecology, Paediatric and Radiology units respectively. Calculate the total cost assigned to each of the units using Activity Based Costing. 16 Marks) D. Calculate the operating income of each unit using Simple Costing and Activity Based Costing assuming that the cleaning costs can be traced to each of the units, Briefly comment on your profitability analysis of each of the three units [12 Marks)