Concept explainers
Comprehensive Care Nursing Home is required by statute and regulation to maintain a minimum 3 to 1 ratio of direct service staff to residents to maintain the licensure associated with the Nursing Home beds. The salary expense associated with direct service staff for the Comprehensive Care Nursing Home would most likely be classified as:
- 1. Variable cost.
- 2. Fixed cost.
- 3.
Overhead costs. - 4. Inventoriable costs.
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Chapter 2 Solutions
Horngren's Cost Accounting, Student Value Edition (16th Edition)
Additional Business Textbook Solutions
Intermediate Accounting
Horngren's Financial & Managerial Accounting, The Financial Chapters (Book & Access Card)
Intermediate Accounting (2nd Edition)
Financial Accounting, Student Value Edition (5th Edition)
Cost Accounting (15th Edition)
Horngren's Financial & Managerial Accounting, The Financial Chapters (6th Edition)
- Identifying Direct and Indirect Costs Northwest Hospital is a full-service hospital that provides everything from major surgery and emergency room care to outpatient clinics. Required: For each cost incurred at Northwest Hospital, indicate whether it would most likely be a direct cost or an indirect cost of the specified cost object by placing anarrow_forwardZamboanga Hospital plans to use the activity-based costing to assign hospital indirect costs to the care of patients. The hospital has identified the following activities and activity rates for the hospital indirect costs: (Refer to image) Determine the activity cost associated with Patient 2. a. P1,388 b. P 908 c. P1,816 d. P4,555arrow_forwardBounce Back Insurance Company carries three major lines of insurance: auto, workers compensation, and homeowners. The company has prepared the following report: Management is concerned that the administrative expenses may make some of the insurance lines unprofitable. However, the administrative expenses have not been allocated to the insurance lines. The controller has suggested that the administrative expenses could be assigned to the insurance lines using activity-based costing. The administrative expenses are comprised of five activities. The activities and their rates are as follows: Activity-base usage data for each line of insurance were retrieved from the corporate records as follows: a. Complete the product profitability report through the administrative activities. Determine the operating income as a percent of premium revenue, rounded to the nearest whole percent. b. Interpret the report.arrow_forward
- Compute the linear cost function, relating total overhead costs to physician contact hours, using the representative observations of 200 and 300 hours. Plot the linear cost function. Does the constant component of the cost function represent the fixed overhead costs of Young and Associates? Why?arrow_forward1. What are the fees for a Basic Exam, Advanced Exam, and a Basic Exam assuming the goal is to cover only variable and fixed direct costs? Assume that the audiology department is allocated $100,000 in total overhead by the clinic, and the department director has allocated $50,000 of this amount to the three services listed above. (To answer this question, assume that the allocation of overhead costs to each service is made on the basis ofnumberof visits.) 2. What are the fees for a Basic Exam, an Advanced Exam, and a Basic Exam assuming the overhead costs must be covered? 7.2 The audiology department at Randall Clinic offers many services to the clinic's patients. The three most common, along with cost and utilization data, are as follows: Copying and distribution of this PDF is prohibited without written permission. For permission, please contact Copyright Clearance Center at www.copyright.com Healthcare Finance Variable Cost Annual Direct Annual Number per Service Fixed Costs of…arrow_forwardRefer to Exhibit 3–12, which portrays the three types of allocation procedures used in two-stage allocation. Give an example of each of these allocation procedures in a hospital setting. The ultimate cost object is a patient-day of hospital care. This is one day of care for one patient. (Hint: First think about the various departments in a hospital. Which departments deal directly with patients; which ones are service departments and do not deal directly with patients? What kinds of costs does a hospital incur that should be distributed among all of the hospital’s departments? Correct hospital terminology is not important here. Focus on the concepts of cost allocation portrayed in Exhibit 3–12.)arrow_forward
- The Audiology Department at Randall Clinic offers many services to the clinic’s patients. The three most common, along with cost and utilization data, are as follows: Service Variable cost per service Annual Direct fixed Cost Annual number of visits Basic examination $5 $50,000 30,000 Advanced examination 7 30,000 1,500 Therapy section 10 40,000 500 What is the fee schedule for these services, assuming that the goal is to cover only variable and direct fixed costs? Assume that the Audiology Department is allocated $100,000 in total overhead by the clinic, and the department director has allocated $50,000 of this amount to the three services listed above. What is the fee schedule assuming that these overhead costs must be covered? (To answer this question, assume that the allocation of overhead costs to each service is made on the basis of number of visits.) Assume that these services must make a combined profit of $25,000. Now, what is the…arrow_forwardShow 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…arrow_forwardShow 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…arrow_forward
- McCullough Hospital uses a job-order costing system to assign costs to its patients. Its direct materials include a variety of items such as pharmaceutical drugs, heart valves, artificial hips, and pacemakers. Its direct labor costs (e.g., surgeons, anesthesiologists, radiologists, and nurses) associated with specific surgical procedures and tests are traced to individual patients. All other costs, such as depreciation of medical equipment, insurance, utilities, incidental medical supplies, and the labor costs associated with around-the clock monitoring of patients are treated as overhead costs. Historically, McCullough has used one predetermined overhead rate based on the number of patient-days (each night that a patient spends in the hospital counts as one patient-day) to allocate overhead costs to patients. Recently a member of the hospital’s accounting staff has suggested using two predetermined overhead rates (allocated based on the number of patient-days) to improve the…arrow_forwardMcCullough Hospital uses a job-order costing system to assign costs to its patients. Its direct materials include a variety of items such as pharmaceutical drugs, heart valves, artificial hips, and pacemakers. Its direct labor costs (e.g., surgeons, anesthesiologists, radiologists, and nurses) associated with specific surgical procedures and tests are traced to individual patients. All other costs, such as depreciation of medical equipment, insurance, utilities, incidental medical supplies, and the labor costs associated with around-the-clock monitoring of patients are treated as overhead costs. Historically, McCullough has used one predetermined overhead rate based on the number of patient-days (each night that a patient spends in the hospital counts as one patient-day) to allocate overhead costs to patients. Recently a member of the hospital’s accounting staff has suggested using two predetermined overhead rates (allocated based on the number of patient-days) to improve the…arrow_forwardMcCullough Hospital uses a job-order costing system to assign costs to its patients. Its direct materials include a variety of items such as pharmaceutical drugs, heart valves, artificial hips, and pacemakers. Its direct labor costs (e.g., surgeons, anesthesiologists, radiologists, and nurses) associated with specific surgical procedures and tests are traced to individual patients. All other costs, such as depreciation of medical equipment, insurance, utilities, incidental medical supplies, and the labor costs associated with around-the-clock monitoring of patients are treated as overhead costs.Historically, McCullough has used one predetermined overhead rate based on the number of patientdays (each night that a patient spends in the hospital counts as one patient-day) to allocate overhead costs to patients. For the most recent period, this predetermined rate was based on three estimates—fixed overhead costs of $17,440,000, variable overhead costs of $110 per patient-day, and a…arrow_forward
- Managerial Accounting: The Cornerstone of Busines...AccountingISBN:9781337115773Author:Maryanne M. Mowen, Don R. Hansen, Dan L. HeitgerPublisher:Cengage LearningFinancial And Managerial AccountingAccountingISBN:9781337902663Author:WARREN, Carl S.Publisher:Cengage Learning,Managerial AccountingAccountingISBN:9781337912020Author:Carl Warren, Ph.d. Cma William B. TaylerPublisher:South-Western College Pub