Cathal's Private Hospital (CPH) is a well-known and highly reputable provider of a range of orthopaedic...

 

 

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Cathal's Private Hospital (CPH) is a well-known and highly reputable provider of a range of orthopaedic surgeries to Irish patients. The hospital has been in operation for ten years and during that time has streamlined all of its services and most of its administrative functions. The hospital accountant is keen to ensure best practice in the finance function, particularly in costing the various surgeries that are conducted and is considering the introduction of activity based costing (ABC). CPH currently applies a traditional approach to costing surgeries by attributing direct costs as far as possible and allocating hospital overheads based on the patient's average length of stay (ALOS) in the hospital. Total hospital overheads for the year are budgeted at €4,801,226 and the total budgeted ALOS for all patients for the year is 23,375 days. To facilitate the introduction of ABC the hospital accountant has analysed all of the overheads incurred into six categories of expense and has also established the cause or driver of the expense as shown in the table below: Expense category X-ray department costs Hospital Consultant costs Hospital Consultant Operating theatre costs operating theatre Physiotherapy of physiotherapy sessions Occupational therapy costs therapy sessions Sundry hospital costs the hospital (ALOS) Cause (driver) of expense Number of X-rays provided Number of meetings with X-ray department costs Hospital Consultant costs Operating theatre costs Physiotherapy costs Occupational therapy costs Sundry hospital costs Number of hours spent in costs Number Number of occupational Average length of stay in Budgeted data relating to the expense categories has also been compiled by the hospital accountant and is as follows: Total X-rays provided Total physiotherapy sessions Total occupational therapy sessions €1,008,320 € 960,267 €1,104,430 € 624,143 € 528,106 € 575,960 6,302 15,223 15,003 Total occupational therapy sessions Total hours in operating theatre Total meetings with Hospital Consultants Direct materials cost ALOS €960 Information relating to two surgeries conducted during the year is given below: 4.2 days Number of X-rays Meetings with Hospital Consultant 4 meetings Physiotherapy Occupational therapy Theatre time Knee surgery 5 sessions 15,003 9,154 8,314 Hip surgery €425 3.5 days 2 2 meetings 4 sessions 3 sessions 5 sessions 2 hours You are required to: (a) Calculate the total cost of each of the two surgeries noted above using: 1.25 hours The costing approach currently used by Cathal's Private Hospital. (5 Marks) (i) Activity based costing. (15 Marks) (b) Comment in detail on your answers in (a) (i) and (ii) above. (10 marks) Total (30 Marks) Cathal's Private Hospital (CPH) is a well-known and highly reputable provider of a range of orthopaedic surgeries to Irish patients. The hospital has been in operation for ten years and during that time has streamlined all of its services and most of its administrative functions. The hospital accountant is keen to ensure best practice in the finance function, particularly in costing the various surgeries that are conducted and is considering the introduction of activity based costing (ABC). CPH currently applies a traditional approach to costing surgeries by attributing direct costs as far as possible and allocating hospital overheads based on the patient's average length of stay (ALOS) in the hospital. Total hospital overheads for the year are budgeted at €4,801,226 and the total budgeted ALOS for all patients for the year is 23,375 days. To facilitate the introduction of ABC the hospital accountant has analysed all of the overheads incurred into six categories of expense and has also established the cause or driver of the expense as shown in the table below: Expense category X-ray department costs Hospital Consultant costs Hospital Consultant Operating theatre costs operating theatre Physiotherapy of physiotherapy sessions Occupational therapy costs therapy sessions Sundry hospital costs the hospital (ALOS) Cause (driver) of expense Number of X-rays provided Number of meetings with X-ray department costs Hospital Consultant costs Operating theatre costs Physiotherapy costs Occupational therapy costs Sundry hospital costs Number of hours spent in costs Number Number of occupational Average length of stay in Budgeted data relating to the expense categories has also been compiled by the hospital accountant and is as follows: Total X-rays provided Total physiotherapy sessions Total occupational therapy sessions €1,008,320 € 960,267 €1,104,430 € 624,143 € 528,106 € 575,960 6,302 15,223 15,003 Total occupational therapy sessions Total hours in operating theatre Total meetings with Hospital Consultants Direct materials cost ALOS €960 Information relating to two surgeries conducted during the year is given below: 4.2 days Number of X-rays Meetings with Hospital Consultant 4 meetings Physiotherapy Occupational therapy Theatre time Knee surgery 5 sessions 15,003 9,154 8,314 Hip surgery €425 3.5 days 2 2 meetings 4 sessions 3 sessions 5 sessions 2 hours You are required to: (a) Calculate the total cost of each of the two surgeries noted above using: 1.25 hours The costing approach currently used by Cathal's Private Hospital. (5 Marks) (i) Activity based costing. (15 Marks) (b) Comment in detail on your answers in (a) (i) and (ii) above. (10 marks) Total (30 Marks)

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a Calculate the total cost of each of the two surgeries noted above using i The costing approach currently used by Cathals Private Hospital 5 Marks Total cost using costing approach currently used by ... View the full answer