The administrator of Hope Hospital has been asked to perform an activity analysis of the emergency room (ER). The ER activities include cost of quality and other patient care activities. The lab tests and transportation are hospital services external to the ER for determining external failure costs. The result of the activity analysis is summarized as follows:

1	Activities	Activity Cost
2	Patient registration	$6,400.00
3	Verifying patient information	9,600.00
4	Assigning patients	12,800.00
5	Searching/waiting for doctor	8,000.00
6	Doctor exam	4,800.00
7	Waiting for transport	17,600.00
8	Transporting patients	16,000.00
9	Verifying lab orders	14,400.00
10	Searching for equipment	8,000.00
11	Incorrect labs	12,800.00
12	Lab tests	17,600.00
13	Counting supplies	19,200.00
14	Looking for supplies	8,000.00
15	Staff training	4,800.00
16	Total	$160,000.00

Required:

1.

Review the Pareto Charts in the panels. Select the Pareto chart the best represents these activities.

2.

Classify the activities into prevention, appraisal, internal failure, external failure, and other patient care activities. Classify the activities into value-added and non-value-added activities.

3.

Use the activity cost information to determine the percentages of total ER costs that are prevention, appraisal, internal failure, external failure, and other patient care activities.*

4.

Determine the percentages of the total ER costs that are value- and non-value-added.*

5.

Interpret the information.

* Refer to the Amount Descriptions list provided for the exact wording of the answer choices for text entries.

Amount Descriptions

Appraisal

External failure

Internal failure

Non-value-added

Other patient care

Prevention

Value-added

2. Classify the activities into prevention, appraisal, internal failure, external failure, and other patient care activities. Classify the activities into value-added and non-value-added activities.

Activity	Activity Cost	Cost of Quality Classification	Value-Added/Non-Value-Added Classification
Patient registration	6,400
Verifying patient information	9,600
Assigning patients	12,800
Searching/waiting for doctor	8,000
Doctor exam	4,800
Waiting for transport	17,600
Transporting patients	16,000
Verifying lab orders	14,400
Searching for equipment	8,000
Incorrect labs	12,800
Lab tests	17,600
Counting supplies	19,200
Looking for supplies	8,000
Staff training	4,800

Cost of Quality Report

3. Use the activity cost information to determine the percentages of total ER costs that are prevention, appraisal, internal failure, external failure, and other patient care activities. Refer to the Amount Descriptions list provided for the exact wording of the answer choices for text entries.

1	Quality Cost Classification	Activity Cost	Percent of Total Department Cost
2
3
4
5
6
7	Total

Value-Added/Non-Value-Added Activity Analysis

4. Determine the percentages of the total ER costs that are value- and non-value-added. Refer to the Amount Descriptions list provided for the exact wording of the answer choices for text entries.

1		Activity Cost	Percent of Total Department Cost
2
3
4	Total

Final Question

Interpret the information.

The ER has 61% of its total costs as . represent 34% of the total costs. This means there is opportunity for cost savings.