ST. Mary's hpsital is preparing its budget for the coming year. it uses an activity based approach for all costs except phisican care. its emergency room has three activity areas with cost drivers as follows:

324 CHAPTER 9I Operational Budgeting and Profit Panning I. Reception-paperwork of incoming patients. Cost driver is the number of forms 2. Treatment-initial diagnosis and treatment of patients. Cost driver is the number of treated Cost driver 3. Cleaning-general cleaning plus preparing treatment facilities for next patient.Cos the number of people visiting emergency room (patients plus person(s) accompanying Budgeted Amount of Cost Cost Driver Rates $40 80 14 Outpatients 7,400 forms 7,000 diagnoses 6,400 people Admitted P 5,500 forms 4,400 diagnoses 2,400 people Activity Area Required a. Prepare the total budgeted cost for each activity b. How might you adjust the budget approach if you found that outpatients were kept ine emergency room for one hour on average while admitted patients remained for two hour c. What advantage does an activity-based approach have over the hospital's former budgtin method of basing the next year's budget on the last year's actual amount plus a perce= increase? L03 E9.26. Sales Budget Summer Fun T-Shirt Shop has very seasonal sales. For 2014, management is trying to da whether to establish a sales budget based on average sales or on sales estimated by quartet unit sales for 2014 are expected to be 10 percent higher than 2013 sales. Unit shirt sales by for 2013 were as follows