Question: Crossroads Health Center runs two programs drug addict rehabilitation and

Crossroads Health Center runs two programs: drug addict rehabilitation and aftercare (counseling and support of patients after release from a mental hospital). The center’s budget for 2013 follows.

Kim Yu, the director of the center, is keen on determining the cost of each program. Yu compiled the following data describing employee allocations to individual programs:

Yu has recently become aware of activity- based costing as a method to refine costing systems. She asks her accoun-tant, Gus Gates, how she should apply this technique. Gates obtains the following budgeted information for 2013:

1. a. Selecting cost- allocation bases that you believe are the most appropriate for allocating indirect costs to programs, calculate the budgeted indirect cost rates for medical supplies; rent and clinic maintenance; administrative costs for patient charts, food, and laundry; and laboratory services.
b. Using an activity- based costing approach to cost analysis, calculate the budgeted cost of each program and the budgeted cost per patient- year of the drug program.
c. What benefits can Crossroads Health Center obtain by implementing the ABC system?
2. What factors, other than cost, do you think Crossroads Health Center should consider in allocating resources to itsprograms?

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  • CreatedJanuary 15, 2015
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