Exercise C-5 Activity-based costing LO P2 Health Co-op is an outpatient surgical

Question

Exercise C-5 Activity-based costing LO P2

Health Co-op 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.

(Round activity rate answers to 2 decimal places, and all other answers to nearest whole number.)

Link to table(s) to write answer: https://gyazo.com/0b98b6c04bec24774cfac397ccadfcb9

OR

Written Questions:

1. Assume costs are allocated based on number of patients. Compute the average cost per patient.

2. Compute the cost per cost driver for each of the three cost centers

3. Use the results from part 2 to allovate costs from each of the three cost centers to the general surgery unit. Compute total cost and average cost per patient for the general surgery unit.

  

Health Co-op 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.

Explanation / Answer

1. If the cost costs are allocated based on number of patients then the avergae cost per unit is calculated as follows:

a. Total cost incurred: $17,77,000

b. Number of patients:600

c. Average cost per patient = a/b = $17,77,000/600 =$2961.67

2. Compute the cost per cost driver for each of the three cost centers

Answer:

3.

Particular Professional salaries Patient services and supplies Building cost Total A.Overhead incurred $16,00,000 27,000 1,50,000 $17,77,000

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