Surgery Center is an outpatient surgical clinic that was profitable for many yea
ID: 2540629 • Letter: S
Question
Surgery Center is an outpatient surgical clinic that was profitable for many years, but Medicare has cut its reimbursements by as much as 40%. 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 activity cost pools and their cost drivers follow Activity Cost Pool Cost Cost Driver Professional salaries Patient services and supplies Building cost iver Quantity $1,008,000 Professional hours 16,280 Number of patiente 80,400 Square feet 8,400 440 1,340 The two main surgical units and their related data follow Hours Square Feet*Patient 1,700 6,700 Service General surgery Orthopedic surgery 520 820 320 120 Orthopedic surgery requires more space for patients, supplies, and equipment Required: 1. & 2. Compute the cost per cost driver for each of the three activity cost pools. Use the'results to llocate costs to both the general surgery and the orthopedic surgery units. Compute total cost and average cost per patient for both the general surgery and the orthopedic surgery units. Prex 5ofs l NextExplanation / Answer
1-
overhead
total professional hours
cost per professional hour = total professional fees/total professional hours
cost per professional hour = total professional fees/total professional hours
professional salaries per hours
1008000
8400
1008000/8400
120
overhead
total no of patients
cost per patient = overhead/no pf patients
cost per patient = overhead/no pf patients
patient service and supplies per patient
16280
440
16280/440
37
Overhead
total square feet
cost per square feet = overhead/total square feet
cost per square feet = overhead/total square feet
building cost per square feet
80400
1340
80400/1340
60
2-
general surgery
no of professional hours
cost of professional salary per hour
total professional salary =1700*120
professional salaries
1700
120
204000
patient service and supplies = no of patient assigned*cost per patient
520
37
19240
building cost = area in square feet* cost per square feet
1340
60
80400
total overheads assigned to general surgery
303640
average cost per patient for general surgery
total overhead cost for general surgery/no of patients
303640/320
948.88
orthopedic surgery
no of professional hours
cost of professional salary per hour
total professional salary =1700*120
professional salaries
6700
120
804000
patient service and supplies = no of patient assigned*cost per patient
820
37
30340
building cost = area in square feet* cost per square feet
120
60
7200
total overheads assigned to orthopedic surgery
841540
average cost per patient for orthopedic surgery
total overhead cost for orthopedic surgery/no of patients
841540/120
7012.83
1-
overhead
total professional hours
cost per professional hour = total professional fees/total professional hours
cost per professional hour = total professional fees/total professional hours
professional salaries per hours
1008000
8400
1008000/8400
120
overhead
total no of patients
cost per patient = overhead/no pf patients
cost per patient = overhead/no pf patients
patient service and supplies per patient
16280
440
16280/440
37
Overhead
total square feet
cost per square feet = overhead/total square feet
cost per square feet = overhead/total square feet
building cost per square feet
80400
1340
80400/1340
60
2-
general surgery
no of professional hours
cost of professional salary per hour
total professional salary =1700*120
professional salaries
1700
120
204000
patient service and supplies = no of patient assigned*cost per patient
520
37
19240
building cost = area in square feet* cost per square feet
1340
60
80400
total overheads assigned to general surgery
303640
average cost per patient for general surgery
total overhead cost for general surgery/no of patients
303640/320
948.88
orthopedic surgery
no of professional hours
cost of professional salary per hour
total professional salary =1700*120
professional salaries
6700
120
804000
patient service and supplies = no of patient assigned*cost per patient
820
37
30340
building cost = area in square feet* cost per square feet
120
60
7200
total overheads assigned to orthopedic surgery
841540
average cost per patient for orthopedic surgery
total overhead cost for orthopedic surgery/no of patients
841540/120
7012.83
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