Historically, McCullough has used one predetermined overhead rate based on the number of patient-days (each night...
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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 $17,240,000, 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: ICU Other Total Estimated number of patient-days Estimated fixed overhead cost Estimated variable overhead cost per patient-day 2,000 $ 3,204,000 $ 236 18,000 $ 14,036,000 $ 96 20,000 $ 17,240,000 Direct materials Patient A $ 4,600 Direct labor $ 25,250 Patient B $ 6,300 $ 36,200 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. Note: Round "Predetermined overhead rate" to 2 decimal places. Round other intermediate calculations and final answers to the nearest dollar amount. 1a. Predetermined overhead rate per patient-day 1b. Total cost for patient A $ 43,458 1b. Total cost for patient B $ 62,912 2a. Predetermined ICU overhead rate per patient-day 2a. Predetermined Other overhead rate per patient-day 2b. Total cost for patient A 2b. Total cost for patient B 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 $17,240,000, 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: ICU Other Total Estimated number of patient-days Estimated fixed overhead cost Estimated variable overhead cost per patient-day 2,000 $ 3,204,000 $ 236 18,000 $ 14,036,000 $ 96 20,000 $ 17,240,000 Direct materials Patient A $ 4,600 Direct labor $ 25,250 Patient B $ 6,300 $ 36,200 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. Note: Round "Predetermined overhead rate" to 2 decimal places. Round other intermediate calculations and final answers to the nearest dollar amount. 1a. Predetermined overhead rate per patient-day 1b. Total cost for patient A $ 43,458 1b. Total cost for patient B $ 62,912 2a. Predetermined ICU overhead rate per patient-day 2a. Predetermined Other overhead rate per patient-day 2b. Total cost for patient A 2b. Total cost for patient B
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Related Book For
Managerial Accounting
ISBN: 978-1259307416
16th edition
Authors: Ray Garrison, Eric Noreen, Peter Brewer
Posted Date:
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