Question
Surgery Center is an outpatient surgical clinic that wants to better understand its costs. It decides to prepare an activity-based cost analysis, including an estimate
Surgery Center is an outpatient surgical clinic that wants to better understand its costs. It decides to prepare an activity-based cost analysis, including an estimate of the average cost of both general surgery and orthopedic surgery. The clinic's three cost centers and their cost drivers follow as does information on the two main surgery centers.
Cost Center | Cost | Cost Driver | Driver Quantity |
Professional Salaries | 900,000 | Professional hours | 17,000 |
Patient Services & supplies | 40,000 | Number of patients | 700 |
Building Cost | 250,000 | Square feet | 5,000 |
Service | Hours | Square Feet | Patients |
General surgery | 6,000 | 1,750 | 500 |
Orthopedic surgery | 11,000 | 3,250 | 200 |
1. Assume costs are allocated based on the number of patients only. Compute the average cost per patient.
2. Compute the cost applied to the general surgery center using the predetermined overhead rate computed in Question 1.
3. Compute the cost applied to the orthopedic surgery center using the predetermined overhead rate computed in Question 1.
4. Using activity-based costing to allocate overhead, compute the cost per driver for each of the three cost centers presented above. Then use that information to calculate the amount of overhead applied to the general surgery center. Only provide the total amount overhead allocated to the general surgery center in the blank.
5. Using activity-based costing to allocate overhead, compute the cost per driver for each of the three cost centers presented above. Then use that information to calculate the amount of overhead applied to the orthopedic surgery center. Only provide the total amount overhead allocated to the orthopedic surgery center in the blank.
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