Activity-Based Costing for a Service Company Valley Hospital plans to use activi

Question

Activity-Based Costing for a Service Company Valley Hospital plans to use activity-based costing to assign hospital indirect costs to the care of patients. The hospital has identified the following activities and activity rates for the hospital indirect costs: Activity Room and meals Radiology Pharmacy Chemistry lab Operating room The activity usage information associated with the two patients is as follows: Activity Rate $186 per day $262 per image $45 per physician order $90 per test $840 per operating room hour

Explanation / Answer

a) Calculation of Activity costs for each patient (Amount in $)

b) Patient Powell apparently had a different condition that required more extensive treatment. Thus, the activity cost to Patient Powell is more than the activity cost of the other patient.

Activity Patient Barns Patient Powell Room and Meals ($186*3 days) = 558 ($186*9 days) = 1,674 Radiology ($262*3 images) = 786 ($262*6 images) = 1,572 Pharmacy ($45*4 orders) = 180 ($45*6 orders) = 270 Chemistry Lab ($90*5 tests) = 450 ($90*8 tests) = 720 Operating Room ($840*3.5 hours) = 2,940 ($840*5.5 hours) = 4,620 Total Activity Cost 4,914 8,856

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