[The following information applies to the questions displayed below.] We Care is

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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 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.

3.

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WorksheetDifficulty: 3 HardLearning Objective: 21-P2 Assign overhead costs using activitybased costing.

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4.

value:
10.00 points

Required information

Use the results from part 1 to allocate costs from each of the three cost centers 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. (Round your answers to the nearest dollar amount. Omit the "$" sign in your response.)

References

WorksheetDifficulty: 3 Hard

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.

Explanation / Answer

1 Cost Center Cost per Driver   Professional salaries 150 per hour   Patient services & supplies 50 per patient   Building cost 100 per sq. ft 2 General surgery Orthopedic surgery   Professional salaries 375000 1125000   Patient services & supplies 20000 5000   Building cost 50000 100000 Total cost 445000 1230000 Average cost per patient 1113 12300

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