Problem: $7\mathrm{.}9$

Consider the following data for a primary care practice that provides two types of services, A and B:

Activity Data

Activity Annual Costs Cost Driver Service A Service B

Check$-$in $ $100,000$ Visit volume $700015000$

Assessment $ $250,000$ Minutes per service $158$

Diagnosis $ $600,000$ Minutes per service $2010$

Treatment $ $1,200,000$ Minutes per service $55$

Check$-$out $ $125,000$ Visit volume $700015000$

Billing $ $250,000$ Number of bills $31$

Total $ $2,525,000$

a$)$ Using ABC techniques, determine the allocation rate for each overhead activity.

Activity Data per Service

Activity Annual Costs $(1)$ Cost Driver Service A Service B Total $(2)$ Allocation Rate $(1)-$: $(2)$

Check$-$in Volume

Assessment Minutes

Diagnosis Minutes

Treatment Minutes

Check$-$out Volume

Billing No$.$ of bills

Total

b$)$ Determine the overhead costs per visit for each type of service

Service A Service B

Activity Cost Driver Allocation Rate Consumption Cost Consumption Cost

Check$-$in Volume

Assessment Minutes

Diagnosis Minutes

Treatment Minutes

Check$-$out Volume

Billing No$.$ of bills

Total

c$)$ Verify that the total annual costs aggregated from individual visit costs equal the total annual costs of the practice

given in the table above.

Service A Service B Total

Cost per unit $($from Part b$)$

Volume $($given$)$

Total