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Managerial Accounting: The Corners...
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Managerial Accounting: The Corners...
Activity-Based Product Costing
Suppose that a surgical ward has gathered the following information for four nursing activities and two types of patients:
Required:
- 1. Determine the total nursing costs assigned to each patient category.
- 2. Output is measured in patient days. Assuming that the normal patient category uses 8,000 patient days and the intensive patient category uses 6,400 patient days, calculate the nursing cost per patient day for each type of patient. (Round to two decimal places.)
- 3. CONCEPTUAL CONNECTION The supervisor of the surgical ward has suggested that patient days is the only driver needed to assign nursing costs to each type of patient. Calculate the charge per patient day (rounded to the nearest cent) using this approach and then explain to the supervisor why this would be a bad decision.
1.
Calculate the total nursing costs which are assigned to each patient category, normal and intensive.
Activity Based Costing (ABC):
Activity based costing is an apportionment of costs that first considers the activity drivers that helps in the allocation of costs to various activities and then allocates costs to different cost objects by using the drivers.
Calculation of total nursing costs:
| Activity | Rate(R) | Quantity(Q) |
Normal ($) |
Intensive ($) |
| (A)Treating patients | 4 |
2.
Compute the nursing costs per patient day for each type of patient.
3.
Compute charge per patient day when patient day is the only driver to assign nursing costs to each type of patient.
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