McCullough Hospital uses a job-order costing system to assign costs to its patients. Its direct materials...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
McCullough Hospital uses a job-order costing system to assign costs to its patients. Its direct materials include a variety of items such as pharmaceutical drugs, heart valves, artificial hips, and pacemakers. Its direct labor costs (e.g., surgeons, anesthesiologists, radiologists, and nurses) associated with specific surgical procedures and tests are traced to individual patients. All other costs, such as depreciation of medical equipment, insurance, utilities, incidental medical supplies, and the labor costs associated with around-the- clock monitoring of patients are treated as overhead costs. Historically, McCullough has used one predetermined overhead rate based on the number of patient-days (each night that a patient spends in the hospital counts as one patient-day) to allocate overhead costs to patients. For the most recent period, this predetermined rate was based on three estimates-fixed overhead costs of $17,360,000, variable overhead costs of $110 per patient- day, and a denominator volume of 20,000 patient-days. Recently a member of the hospital's accounting staff has suggested using two predetermined overhead rates (allocated based on the number of patient-days) to improve the accuracy of the costs allocated to patients. The first overhead rate would include all overhead costs within the Intensive Care Unit (ICU) and the second overhead rate would include all Other overhead costs. Information pertaining to these two cost pools and two of the hospital's patients-Patient A and Patient B-is provided below: Estimated number of patient-days Estimated fixed overhead cost ICU Other Total Estimated variable overhead cost per patient-day 2,000 $ 3,216,000 $ 236 18,000 $ 14,144,000 $ 96 20,000 $ 17,360,000 Direct materials Patient A $ 4,900 Patient B $ 6,600 Direct labor $ 26,000 $ 36,800 Total number of patient-days (including ICU) Number of patient-days spent in ICU 14 21 0 7 Required: 1.Assuming McCullough continues to use only one predetermined overhead rate, calculate: a. The predetermined overhead rate. b. The total cost, including direct materials, direct labor, and applied overhead, assigned to Patient A and Patient B. 2. Assuming McCullough calculates two overhead rates as recommended by the staff accountant, calculate: a. The ICU and Other overhead rates. b. The total cost, including direct materials, direct labor, and applied overhead, assigned to Patient A and Patient B. (Round "Predetermined overhead rate" to 2 decimal places. Round other intermediate calculations and final answers to the nearest dollar amount.) 868.00 per patient-day McCullough Hospital uses a job-order costing system to assign costs to its patients. Its direct materials include a variety of items such as pharmaceutical drugs, heart valves, artificial hips, and pacemakers. Its direct labor costs (e.g., surgeons, anesthesiologists, radiologists, and nurses) associated with specific surgical procedures and tests are traced to individual patients. All other costs, such as depreciation of medical equipment, insurance, utilities, incidental medical supplies, and the labor costs associated with around-the- clock monitoring of patients are treated as overhead costs. Historically, McCullough has used one predetermined overhead rate based on the number of patient-days (each night that a patient spends in the hospital counts as one patient-day) to allocate overhead costs to patients. For the most recent period, this predetermined rate was based on three estimates-fixed overhead costs of $17,360,000, variable overhead costs of $110 per patient- day, and a denominator volume of 20,000 patient-days. Recently a member of the hospital's accounting staff has suggested using two predetermined overhead rates (allocated based on the number of patient-days) to improve the accuracy of the costs allocated to patients. The first overhead rate would include all overhead costs within the Intensive Care Unit (ICU) and the second overhead rate would include all Other overhead costs. Information pertaining to these two cost pools and two of the hospital's patients-Patient A and Patient B-is provided below: Estimated number of patient-days Estimated fixed overhead cost ICU Other Total Estimated variable overhead cost per patient-day 2,000 $ 3,216,000 $ 236 18,000 $ 14,144,000 $ 96 20,000 $ 17,360,000 Direct materials Patient A $ 4,900 Patient B $ 6,600 Direct labor $ 26,000 $ 36,800 Total number of patient-days (including ICU) Number of patient-days spent in ICU 14 21 0 7 Required: 1.Assuming McCullough continues to use only one predetermined overhead rate, calculate: a. The predetermined overhead rate. b. The total cost, including direct materials, direct labor, and applied overhead, assigned to Patient A and Patient B. 2. Assuming McCullough calculates two overhead rates as recommended by the staff accountant, calculate: a. The ICU and Other overhead rates. b. The total cost, including direct materials, direct labor, and applied overhead, assigned to Patient A and Patient B. (Round "Predetermined overhead rate" to 2 decimal places. Round other intermediate calculations and final answers to the nearest dollar amount.) 868.00 per patient-day
Expert Answer:
Answer rating: 100% (QA)
1 Using One Predetermined Overhead Rate a Predetermined Overhead Rate Total estimated overhead cost Fixed overhead cost Variable overhead cost per pat... View the full answer
Related Book For
Managerial Accounting
ISBN: 978-1259307416
16th edition
Authors: Ray Garrison, Eric Noreen, Peter Brewer
Posted Date:
Students also viewed these accounting questions
-
A company that produces aluminum foil, offers the following discount schedule for its sheets as follows: 1 to 499, $10 each; 500 to 999, $8.5 each; and 1000 or more, $8.0 each. Mini Market X orders...
-
Write a paper on the brothers karamazov, fyodor dostoyevsky creates a conversation between two brothers: the cynical ivan, and the devoutly religious and earnest alyosha. In their dialogues...
-
Why does every bank have a vested interest in optimizing its reserve assets? What does a bank lose by keeping too many reserves? What does it risk by keeping too few reserves?
-
Identify if the account is a Asset, Liability, Equity, Expense or Income. Question 1 options: 12345 Notes Payable 12345 Commission Received 12345 Revenue from Transactions 12345 Cash with Business...
-
A technician has just taken their first set of readings on an alignment job. The solution calls for the removal of 0.100 inch from the back feet of the motor. There are no shims under the motor back...
-
The merchandise inventory was destroyed by fire on August 19. The following data were obtained from the accounting records: a. Estimate the cost of the merchandise destroyed. b. Briefly describe the...
-
Determine whether the following pairs are equivalent by constructing truth tables: [bc abd + ab'd] and [bc + ad] [abc'd] and [((a'+b') (cd'))']
-
A tin of cat food weighing 28 g is placed at the top of a dry chopping board made of wood and the board is slowly raised in angle until the tin slides downwards. Measured by the mid-point of a...
-
Calculate the implied current interest rates in Togo given that: the 180-day forward rate of the Togo currency is $0.85/T, the current exchange rate is one US dollar equals 1.3456 of the Togo...
-
A company issues 3 6 , 4 0 0 shares of $ 1 par common stock with a fair value of $ 6 per share ( based upon a recent sale of 2 6 shares ) for land. The land is recently appraised at $ 2 0 8 , 0 0 0...
-
TABLE OF CONTENTS 1. Introduction 2. Download Code and Setup 3. Problem 1: Battery Meter Simulation o 3.1. Overview o 3.2. batt update.c: Updating the Display with User Code o 3.3. Battery Meter...
-
Buffalo Company reported the following amounts in the stockholders' equity section of its December 31, 2019, balance sheet. Preferred stock, 10%, $100 par (10,000 shares authorized, 2,200 shares...
-
A rocket sled moves along a track such that its position is given by the function x(t) show below. The values of the constants are A = 2.00 m/s, B = 4.00 m/s. x(t) = At + Bt (a) What is the position...
-
Read the case study Carrefour S.A and analyze this case
-
Economic feasibility is an important guideline in designing cost accounting systems. Do you agree? Explain.
-
With reference to Exercise 4.5, find an expression for the distribution function \(F(x)\) of the random variable. Data From Exercise 4.5 k 4.5 Given that f(x): = is a probability distribution for 2x...
-
Given that \(f(x)=\frac{k}{2^{x}}\) is a probability distribution for a random variable that can take on the values \(x=\) \(0,1,2,3\), and 4 , find \(k\).
-
Check whether the following can define probability distributions and explain your answers. (a) \(f(x)=\frac{1}{4}\) for \(x=10,11,12,13\) (b) \(f(x)=\frac{2 x}{5}\) for \(x=0,1,2,3,4,5\) (c)...
Study smarter with the SolutionInn App