An assisted-living facility provides services in the form of residential space, meals, and other occupant assistance (OOA) to its occupants. The facility currently uses a traditional cost accounting system that charges each occupant a daily rate equal to the facility’s annual cost of providing residential space, meals, and OOA divided by total occupant days. However, an activity-based costing (ABC) analysis has revealed that occupants’ use of OOA varies substantially. This analysis determined that occupants could be grouped into three categories (low, moderate, and high usage of OOA) and that the activity driver of OOA should be nursing hours. The driver of the residential space and meals is occupant days. The following quantitative information was also provided: Occupant Category Annual Occupant Days Annual Nursing Hours Low usage 36,000 90,000 Medium usage 18,000 90,000 High usage 6,000 120,000 60,000 300,000 The total annual cost of OOA was $7.5 million, and the total annual cost of providing residential space and meals was $7.2 million. Accordingly, the ABC analysis indicates that the daily costing rate for providing residential space, meals, and OOA should be A.$182.50 for occupants in the low-usage category. B.$145.00 for occupants in the medium-usage category. C.$245.00 for occupants in the high-usage category. D.$620.00 for all occupants.

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter2: Building Blocks Of Managerial Accounting

Section: Chapter Questions

Problem 2TP: This list contains costs that various organizations incur; they fall into three categories: direct...

See similar textbooks

Related questions

Concept explainers

Question

An assisted-living facility provides services in the form of residential space, meals, and other occupant assistance (OOA) to its occupants. The facility currently uses a traditional cost accounting system that charges each occupant a daily rate equal to the facility’s annual cost of providing residential space, meals, and OOA divided by total occupant days. However, an activity-based costing (ABC) analysis has revealed that occupants’ use of OOA varies substantially. This analysis determined that occupants could be grouped into three categories (low, moderate, and high usage of OOA) and that the activity driver of OOA should be nursing hours. The driver of the residential space and meals is occupant days. The following quantitative information was also provided:

Occupant
Category

Annual
Occupant
Days

Annual
Nursing
Hours

Low usage

36,000

90,000

Medium usage

18,000

90,000

High usage

6,000

120,000

60,000

300,000

The total annual cost of OOA was $7.5 million, and the total annual cost of providing residential space and meals was $7.2 million. Accordingly, the ABC analysis indicates that the daily costing rate for providing residential space, meals, and OOA should be

A.$182.50 for occupants in the low-usage category.
B.$145.00 for occupants in the medium-usage category.
C.$245.00 for occupants in the high-usage category.
D.$620.00 for all occupants.

Expert Solution

Trending now

This is a popular solution!

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions