St Mary's hospital is preparing its budget for the coming year.it uses a activity based approach for all cost except physician care,it's emergency room has 3 activities with cost drivers as follows

reception -paperwork of incoming patients.cost driver is the number of forms completed

treatment-initial diagnosis and treatment of patients,cost driver is the number of diagnosis treated

cleaning- general cleaning plus preparing treatment facilities for next patient,cost driver is the # of people visiting the emergency room.(patient plus the # of persons accompanying them

activity area Cost driver rates outpatients admitted patients

reception $40 7,400 forms 5,500 forms

treatment 80 7,0000 diagnosis 4,400 diagnosis

cleaning 14 6,4000 people 2,400 people

a) prepare the total budget for each activity

b)how might you adjust the budget approach if you found that outpatient were kept in the emergency room for 1 hour on average while admitted patients remain 2 hours?

c) what advantage does an activity based approached have over the hospital's former budgeting method of basing the next year's budget on the last year's actual amount plus a percentage increase.