Gilead Healthcare Inc. wishes to determine its product costs. Gilead offers a variety of medical procedures (operations) that are considered its "products." The overhead has been separated into three major activities. The annual estimated activity costs and activity bases are provided below.

Total "patient days" are determined by multiplying the number of patients by the average length of stay in the hospital. A weighted care unit (wcu) is a measure of nursing effort used to care for patients. There were 140,000 weighted care units estimated for the year. In addition, Gilead estimated 4,600 patients and 17,200 patient days for the year. (The average patient is expected to have a little less than a four day stay in the hospital.)
During a portion of the year, Gilead collected patient information for three selected procedures, as shown below.

Private insurance reimburses the hospital for these activities at a fixed daily rate of $350 per patient day for all three procedures.
Instructions
1. Determine the activity rates.
2. Determine the activity cost for each procedure.
3. Determine the excess or deficiency of reimbursements over activity cost.
4. Interpret yourresults.

Transcribed Image Text:

Activity Activity Pool Cost Activity Base Scheduling and admitting Housekeeping Nursing 230,000 2,150,000 2,520,000 S4,900,000 Number of patients Number of patient days Weighted care unit Total costs Activity-Base Procedure A Number of patients Average length of stay 0 Weighted care units Procedure B Number of patients Average length of stay care units Procedure C Number of patients Average length of stay Weighted care units