Integrative Exercise

Cost System Choices, Budgeting, and Variance Analyses for Sacred Heart Hospital

The Two Cost Systems

Sacred Heart Hospital (SHH) faces skyrocketing nursing costs, all of which relate to its two biggest nursing service linesthe Emergency Room (ER) and the Operating Room (OR). SHH's current cost system assigns total nursing costs to the ER and OR based on the number of patients serviced by each line. Total hospital annual nursing costs for these two lines are expected to equal $300,000. The table below shows expected patient volume for both lines.

MeasureERORTotal

Number of patients (ER visits or OR surgeries)1,0001,0002,000

Number of vital signs checks2,0004,0006,000

Number of nursing hours10,0005,00015,000

Required:

1.Using the current cost system, calculate the hospital-wide rate based on number of patients.

$______ per patient

. 2. Calculate the amount of nursing costs that the current cost system assigns to the ER and to the OR.

The nursing cost, assigned to the ER $_____

The nursing cost, assigned to the OR $_____

3.Using the results from Requirement 2, calculate the cost per OR nursing hour under the current cost system.

$______ per OR hour