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[The following information applies to the questions displayed below,] We Care is an outpatient surgical clinic that was profitable for many years, but Medicare has
[The following information applies to the questions displayed below,] We Care is an outpatient surgical clinic that was profitable for many years, but Medicare has cut its reimbursements by as much as 50%. As a result, the clinic 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. Cost Center Cost Cost Driver Driver Quantity $ 1,600,000 Professional salaries Patient services and supplies Building cost 25,000 149,000 Professional hours Number of patients Square feet 11,000 600 1,600 The two main surgical units and their related data follow. Hours Square Feet Patients 2,500 8,500 Service General surgery Orthopedic surgery 500 1,100 200 400 Orthopedic surgery requires more space for patients, supplies, and equipment
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