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Simmy is a privately owned profit seeking hospital that specialises in operations to replace hip and knee joints. Simmy traditionally determines its prices by adding
Simmy is a privately owned profit seeking hospital that specialises in operations to replace hip and knee joints. Simmy traditionally determines its prices by adding a 10% mark-up to the budgeted full cost of an operation. The fixed overheads are absorbed on the basis of operating hours using a predetermined rate. Required: (a) Calculate the number of hip operations undertaken during the year and the variable cost of performing a knee operation. (5 marks) (b) Calculate the prices that Simmy would have charged in 2018 for: (i) A hip operation; (ii) A knee operation (5 marks) (c) An activity based costing study recently discovered that the fixed overheads are determined by non operating time related activities. The study revealed the following data: t ( ; F Required: Re-calculate the prices that would have been charged in 2018 for each knee and hip operation by using an activity based costing approach. (5 marks) (d) Compare the results of your calculated prices in (b) and (c) and suggest with reasons what pricing decisions you would recommend to the hospital
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