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

Total €œpatient 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 160,000 weighted care units estimated for the year. In addition, Healthmark estimated 5,000 patients and 22,500 patient days for the year. (The average patient is expected to have a a little more than a four-day stay in the
hospital.) During a portion of the year, Healthmark collected patient information for three se-lected procedures, as shown below.

Private insurance reimburses the hospital for these activities at a fixed daily rate of $400 per patient day for all three procedures.

1. Determine the activity rates.
2. Determine the activity cost for each procedure.
3. Determine the excess or deficiency of reimbursements to activity cost.
4. Interpret your results.

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Budgeted Activity Cost Activity Base Activity $ 300,000 2,925,000 3,840,000 Scheduling and admitting Housekeeping Nursing Total costs Number of patients Number of patient days Weighted care unit $7,065,000 Activity-Base Usage Procedure A Number of patients Average length of stay 230 X 5 days Patient days 1,150 Weighted care units 16,000 Procedure B Number of patients 540 Average length of stay X 4 days Patient days 2,160 Weighted care units 5,000 Procedure C Number of patients 1,000 Average length of stay X 3 days Patient days 3,000 Weighted care units 20,000