Question 5 (20 marks) ch5 Crosstown Health Center runs two programs: drug addict rehabilitation and aftercare (counseling and support of patients after release from a mental hospital). The center's budget for 2017 follows. Professional salaries: 4 physicians $150,000 12 psychologists $75,000 16 nurses $30,000 Medical supplies Rent and clinic maintenance Administrative costs to manage patient charts, food, laundry Laboratory services Total $600,000 900,000 480,000 $1,980,000 242,000 138,600 484,000 92,400 $2,937,000 Kim Yu, the director of the center, is keen on determining the cost of each program. Yu compiles the following data describing employee allocations to individual programs: Physicians Psychologists Nurses Drug 4 Aftercare Total Employees 4 4 8 12 6 10 16 Yu has recently become aware of activity-based costing as a method to refine costing systems. She asks her accountant, Gus Gates, how she should apply this technique. Gates obtains the following budgeted information for 2017: Drug Aftercare Total Square feet of space occupied by each program 9,000 12,000 21,000 Patient-years of service 50 60 110 Number of laboratory tests 1,400 700 2,100 Required: 1. a. 2. Selecting cost-allocation bases that you believe are the most appropriate for allocating indirect costs to programs, calculate the budgeted indirect cost rates for medical supplies; rent and clinic maintenance; administrative costs for patient charts, food, and laundry; and laboratory services. (4 marks) b. Using an activity-based costing approach to cost analysis, calculate the budgeted cost of each program and the budgeted cost per patient-year of the drug program. (10 marks) C. What benefits can Crosstown Health Center obtain by implementing the ABC system? (2 marks) What factors, other than cost, do you think Crosstown Health Center should consider in allocating resources to its programs? (4 marks)