Show a detailed, step by step process for the following question below: “Apollo is a local hospital that offers two types of procedures. Currently, Apollo uses a simple system to calculate the overhead cost per treatment. This is done by taking the total overhead cost and dividing it by the number of treatments. Using this method, the full cost for each procedure is shown below: Procedure X Y Direct costs per procedure £2,610 £1,560 Full cost per procedure £2,831 £1,781 Recently, another competitor has implemented activity based costing (ABC). This has led the finance director to consider whether this alternative costing technique would bring any benefits. She has obtained an analysis of Apollo’s total overheads for the last year and some additional data, all of which is shown below:” Cost Cost driver Administrative costs Administrative time per procedure £935,080 Nursing costs Length of patient stay £3,127,808 Catering costs Number of meals £483,488 General facility costs Length of patient stay £4,276,800 £8,823,176 Procedure X Y No. of procedures 24,000 16,000 Administrative time per procedure (hours) 3 1.5 Length of patient stay per procedure (hours) 36 18 Average no. of meals required per patient 6 2 Required: “Calculate the full cost per procedure using activity-based costing.” “Based on your findings in part (a), advise the finance director as to whether activity-based costing should be implemented at Apollo.”
Show a detailed, step by step process for the following question below:
“Apollo is a local hospital that offers two types of procedures. Currently, Apollo uses a simple system to calculate the overhead cost per treatment. This is done by taking the total overhead cost and dividing it by the number of treatments. Using this method, the full cost for each procedure is shown below:
|
Procedure |
X |
Y |
|
Direct costs per procedure |
£2,610 |
£1,560 |
|
Full cost per procedure |
£2,831 |
£1,781 |
Recently, another competitor has implemented activity based costing (ABC). This has led the finance director to consider whether this alternative costing technique would bring any benefits. She has obtained an analysis of Apollo’s total
|
Cost |
Cost driver |
|
|
Administrative costs |
Administrative time per procedure |
£935,080 |
|
Nursing costs |
Length of patient stay |
£3,127,808 |
|
Catering costs |
Number of meals |
£483,488 |
|
General facility costs |
Length of patient stay |
£4,276,800 |
|
|
£8,823,176 |
|
Procedure |
X |
Y |
|
No. of procedures |
24,000 |
16,000 |
|
Administrative time per procedure (hours) |
3 |
1.5 |
|
Length of patient stay per procedure (hours) |
36 |
18 |
|
Average no. of meals required per patient |
6 |
2 |
Required:
- “Calculate the full cost per procedure using activity-based costing.”
- “Based on your findings in part (a), advise the finance director as to whether activity-based costing should be implemented at Apollo.”
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