Question
Use the information below (Exhibit 12-14) to answer the following questions. Calculate the per unit cost of an initial visit using both the (a) conventional
Use the information below (Exhibit 12-14) to answer the following questions.
- Calculate the per unit cost of an initial visit using both the (a) conventional and (b) ABC approaches.
- Calculate the per unit cost of a regular visit using both the (a) conventional and (b) ABC approaches.
- Calculate the per unit cost of an intensive visit using both the (a) conventional and (b) ABC approaches.
Exhibit 12-14 | ||||||||||||
Basic data and calculation of unit costs using a conventional approach | Total Cost by Visit Type | |||||||||||
Basic Data | ||||||||||||
A | B | C | D | |||||||||
Initial | Regular | Intensive | Total | |||||||||
(Given) | (Given) | (Given) | (A + B + C) | |||||||||
1 | Number of visits | 8,000 | 26,000 | 8,600 | 42,600 | |||||||
2 | Direct materials (etc.) | $40,000 | $50,000 | $65,000 | $155,000 | |||||||
3 | Direct labor | $100,000 | $120,000 | $280,000 | $500,000 | |||||||
4 | Estimated overhead (total is a given) | $229,000 | ||||||||||
5 | Cost / visit: conventional method |
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Additional basic data | 1) Basic data: annual projections of overhead costs by activity |
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Cost Driver Information | ||||||||||||
Activity | I | J | K | |||||||||
Cost | Driver | Units | ||||||||||
(Given) | (Given) | (Given) | ||||||||||
6 | Intake | $34,000 | New visits | 3,550 | New visits | |||||||
7 | Medical records | $35,000 | Time spent | 2,390 | Hours | |||||||
8 | Billing | $65,000 | Time spent | 5,400 | Hours | |||||||
9 | Other | $95,000 | Visits | 42,600 | Visits | |||||||
10 | Total | $229,000 |
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2) Basic data: actual annual operating results of cost drivers to be used to assign ABC overhead cost | ||||||||||||
Visit Type | ||||||||||||
M | N | O | P | |||||||||
Initial | Regular | Intensive | Total | |||||||||
(Given) | (Given) | (Given) | (M + N + O) | |||||||||
11 | New visits | 2,500 | 700 | 350 | 3,550 | |||||||
12 | Medical records | 600 | 640 | 1,150 | 2,390 | |||||||
13 | Billing | 3,200 | 1,000 | 1,200 | 5,400 | |||||||
14 | Other | 8,000 | 26,000 | 8,600 | 42,600 |
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