MyLab Accounting with Pearson eText -- Access Card -- for Horngren's Cost Accounting
16th Edition
ISBN: 9780134476384
Author: Srikant M. Datar, Madhav V. Rajan
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Videos
Textbook Question
Chapter 9, Problem 9.46P
Cost allocation, responsibility accounting, ethics (continuation of Problem 9-45). In 2018, only 876,000 Mealman meals were produced and sold to the hospitals. Wright suspects that hospital controllers had systematically inflated their 2018 meal estimates.
- 1. Recall that Mealman uses the master-budget capacity utilization to allocate fixed costs and to price meals. What was the effect of production-volume variance on Mealman’s operating income in 2018?
Required
- 2. Why might hospital controllers deliberately overestimate their future meal counts?
- 3. What other evidence should Meals To Go’s president seek to investigate Wright’s concerns?
- 4. Suggest two specific steps that Wright might take to reduce hospital controllers’ incentives to inflate their estimated meal counts.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
The administrator of Break-a-Leg Hospital is aware of the need to keep his costs down because he just negotiated a new capitated arrangement with a large insurance company. Below are selected planned and actual expenses for the previous month.
Givens:
Budgeteda
Actual
A
Patient days
27,000
26,000
B
Pharmacy
$120,000
$160,000
C
Miscellaneous supplies
$66,000
$77,500
D
Fixed overhead costs
$808,000
$880,000
1. Prepare a flexible expense estimate for variable costs.
. Flexible budget estimate.
Budgeted
Flexible
Actual
Patient days
27,000
26,000
Cost per patient day
$6.89
$9.13
Total cost
$186,000
$237,500
2. Compute the volume variance.3. Compute the cost variance. 4. Compute the per unit cost variance.
5. Is the unfavorable variance caused by the volume of patients or the cost…
The following are planned and actual revenues for Cutting Edge Surgery Center. Because they are one of four surgery centers in the community, the administrator is concerned with his rates in relation to those of his competitors.
Givens:
Budgeteda
Actual
Surgical volume
1,500
1,700
Gift shop revenues
$15,000
$17,000
Surgery revenues
$500,500
$750,750
Parking revenues
$15,000
$17,000
Determine the total variance between the planned and actual budgets.
Prepare a flexible budget estimate for surgical volume;surgical revenue per unit and surgical revenue
Determine the volume variance for surgical revenues and the rate variance for surgical revenues
Determine the per unit rate variance for surgical revenue
you have been asked by management to explain variances in cost under inpatient capitated contract.
the intensity of care delivered dropped from a budgeted case mix of 0.90 to an actual case mis of 0.85. what dollar effect did this have on actual cost.
cost per case increased 4900 from budgeted value of 4750. this increased actual total cost by what amount?
budget
actual
inpatient cost
12,568,500
16618350
members
4200
4200
admission rate
0.07
0.095
case mix index
0.9
0.85
cost per case (CMI = 1.0)
4750
4900
Chapter 9 Solutions
MyLab Accounting with Pearson eText -- Access Card -- for Horngren's Cost Accounting
Ch. 9 - Differences in operating income between variable...Ch. 9 - Why is the term direct costing a misnomer?Ch. 9 - Do companies in either the service sector or the...Ch. 9 - Explain the main conceptual issue under variable...Ch. 9 - Companies that make no variable-cost/fixed-cost...Ch. 9 - The main trouble with variable costing is that it...Ch. 9 - Give an example of how, under absorption costing,...Ch. 9 - What are the factors that affect the breakeven...Ch. 9 - Critics of absorption costing have increasingly...Ch. 9 - What are two ways of reducing the negative aspects...
Ch. 9 - Prob. 9.11QCh. 9 - Describe the downward demand spiral and its...Ch. 9 - Will the financial statements of a company always...Ch. 9 - Prob. 9.14QCh. 9 - The difference between practical capacity and...Ch. 9 - In comparing the absorption and variable cost...Ch. 9 - Queen Sales, Inc. has just completed its first...Ch. 9 - King Tooling has produced and sold the following...Ch. 9 - The following information relates to Drexler Inc.s...Ch. 9 - Prob. 9.20MCQCh. 9 - Variable and absorption costing, explaining...Ch. 9 - Throughput costing (continuation of 9-21). The...Ch. 9 - Variable and absorption costing, explaining...Ch. 9 - Throughput costing (continuation of 9-23). The...Ch. 9 - Variable versus absorption costing. The Tomlinson...Ch. 9 - Absorption and variable costing. (CMA) Miami,...Ch. 9 - Absorption versus variable costing. Horace Company...Ch. 9 - Candyland uses standard costing to produce a...Ch. 9 - Capacity management, denominator-level capacity...Ch. 9 - Denominator-level problem. Thunder Bolt Inc., is a...Ch. 9 - Variable and absorption costing and breakeven...Ch. 9 - Variable costing versus absorption costing. The...Ch. 9 - Throughput Costing (continuation of 9-32) 1....Ch. 9 - Variable costing and absorption costing, the Z-Var...Ch. 9 - Comparison of variable costing and absorption...Ch. 9 - Effects of differing production levels on...Ch. 9 - Alternative denominator-level capacity concepts,...Ch. 9 - Motivational considerations in denominator-level...Ch. 9 - Denominator-level choices, changes in inventory...Ch. 9 - Variable and absorption costing and breakeven...Ch. 9 - Downward demand spiral. Market.com is about to...Ch. 9 - Absorption costing and production-volume...Ch. 9 - Operating income effects of denominator-level...Ch. 9 - Variable and absorption costing, actual costing....Ch. 9 - Prob. 9.45PCh. 9 - Cost allocation, responsibility accounting, ethics...Ch. 9 - Absorption, variable, and throughput costing....Ch. 9 - Costing methods and variances, comprehensive. Rob...
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
- Andresen Company had the following quality costs for the years ended June 30, 20X1 and 20X2: At the end of 20X1, management decided to increase its investment in control costs by 50% for each categorys items, with the expectation that failure costs would decrease by 20% for each item of the failure categories. Sales were 6,000,000 for both 20X1 and 20X2. Required: 1. Calculate the budgeted costs for 20X2, and prepare an interim quality performance report. 2. Comment on the significance of the report. How much progress has Andresen made?arrow_forwardIntegrative ExerciseCost System Choices, Budgeting, and Variance Analyses for Sacred Heart Hospital The Two Cost Systems Sacred Heart Hospital (SHH) faces skyrocketing nursing costs, all of which relate to its two biggest nursing service lines—the Emergency Room (ER) and the Operating Room (OR). SHH's current cost system assigns total nursing costs to the ER and OR based on the number of patients serviced by each line. Total hospital annual nursing costs for these two lines are expected to equal $300,000. The table below shows expected patient volume for both lines. MEASURE ER OR TOTAL Number of patients (ER visits or OR surgeries) 1,000 1,000 2,000 Number of vital signs checks 2,000 4,000 6,000 Number of nursing hours 10,000 5,000 15,000 1. Using the current cost system, calculate the hospital-wide rate based on number of patients. 2. Calculate the…arrow_forwardIntegrative ExerciseCost System Choices, Budgeting, and Variance Analyses for Sacred Heart Hospital The Two Cost Systems Sacred Heart Hospital (SHH) faces skyrocketing nursing costs, all of which relate to its two biggest nursing service lines—the Emergency Room (ER) and the Operating Room (OR). SHH's current cost system assigns total nursing costs to the ER and OR based on the number of patients serviced by each line. Total hospital annual nursing costs for these two lines are expected to equal $300,000. The table below shows expected patient volume for both lines. Measure ER OR Total Number of patients (ER visits or OR surgeries) 1,000 1,000 2,000 Number of vital signs checks 2,000 4,000 6,000 Number of nursing hours 10,000 5,000 15,000 4. Using the vital-signs costing system, calculate the hospital-wide rate based on the number of vital signs checks.$fill in the blank 5 per vital signs check 5. Calculate the amount of nursing costs…arrow_forward
- Integrative ExerciseCost System Choices, Budgeting, and Variance Analyses for Sacred Heart Hospital The Two Cost Systems Sacred Heart Hospital (SHH) faces skyrocketing nursing costs, all of which relate to its two biggest nursing service lines—the Emergency Room (ER) and the Operating Room (OR). SHH's current cost system assigns total nursing costs to the ER and OR based on the number of patients serviced by each line. Total hospital annual nursing costs for these two lines are expected to equal $300,000. The table below shows expected patient volume for both lines. Measure ER OR Total Number of patients (ER visits or OR surgeries) 1,000 1,000 2,000 Number of vital signs checks 2,000 4,000 6,000 Number of nursing hours 10,000 5,000 15,000 Budgeting and Variance Analysis In an effort to better plan for and control OR costs, SHH management asked Jack to calculate the flexible budget variance (i.e., flexible budget costs - actual costs) for…arrow_forwardAs the nurse manager of the new 15-bed observation unit, you are responsible for reporting to your nursing director and the finance department any variances identified within your operating budget. Listed below is your monthly operating report. Please review and discuss the specific variances and how you will determine the causes of variances. Actual Budget Variance Volume/Census 360 420 Supplies $8,550 $7,800 Nursing Labor $58,450 $52,575arrow_forwardThe controller of Conrad Aiken Surgical Center was reviewing monthly financial reports and noted some differences. The center had fallen 8 short of its plan to perform 450 procedures during the month. Despite that shortfall, surgical revenue exceeded the $830,250 budget, coming in at $848,640. 1. Construct the flexible budget estimate for revenue, procedures, and revenue per procedure. Budgeted Flexible Actual A. Revenue 830,250 848,640 B. Procedures 450 442 C. Revenue per procedure $1,845 $1,920 2. Calculate the revenue volume variance. 3. Calculate the revenue rate variance . 4. Is the unfavorable variance caused by volume or by the rate? Enter VOLUME or RATE as your answer.arrow_forward
- The Terminator Inc. provides on-site residential pest extermination services. The company has several mobile teams who are dispatched from a central location in company-owned trucks. The company uses the number of jobs to measure activity. At the beginning of April, the company budgeted for 100 jobs, but the actual number of jobs turned out to be 105. A report comparing the budgeted revenues and costs to the actual revenues and costs appears below: (picture) Required:Is the above variance report useful for evaluating how well revenues and costs were controlled during April? Why, or why not?arrow_forwardAs part of her annual review of her company’s budgets versus actuals, Mary Gerard isolates unfavorable variances with the hope of getting a better understanding of what caused them and how to avoid them next year. The variable overhead efficiency variance was the most unfavorable over the previous year, which Gerard will specifically be able to trace to: a. Actual overhead costs below applied overhead costs. b. Actual production units below budgeted production units. c. Standard direct labor hours below actual direct labor hours. d. The standard variable overhead rate below the actual variable overhead rate.arrow_forwardChildren's Hospital of the King's Daughters Health System in Norfolk, Virginia, introduced a new budgeting method that allowed the hospital's annual plan to be updated for changes in operating plans. For example, if the budget was based on 400 patient-days (number of patients × number of days in the hospital) and the actual count rose to 450 patient-days, the variable costs of staffing, lab work, and medication costs could be adjusted to reflect this change. The budget manager stated, “I work with hospital directors to turn data into meaningful information and effect change before the month ends.” What budgeting method is being used under the new approach? What budgeting method do you think was being used under the old method?arrow_forward
- Following increased competition and customer expectations, ABC company has been forced to revisit its operational strategy and its quality standards. The following budgeted data for 2022 are available:Number of Trainees 4,500, Operating Income $54,000Budgeted Variable Cost per Trainee: Trainee's Support Service $36 Training Materials $12 Foods $20Miscellaneous Products & Services $20 Budgeted Fixed Cost per Training: Facilities 14,500 Salaries 15,500 Based on the customer survey it conducted, ABC company has learned that several improvements to its products and services are required. The improvements would provide the following impacts:Increase in the Number of Trainees 60%Increase in the Total Variable Costs 55%Increase in the Total Fixed Costs 85%You are required to:(i) Calculate the budgeted revenue per trainee based on the available data. (ii) Assuming that budgeted revenue per trainee remains unchanged, explain (with numerical justifications) whether ABC company should…arrow_forwardThe Safe Clinic computes a cost of treating each patient. It allocates costs to departments and then applies departmental overhead costs to individual patients using a different budgeted overhead rate in each department. The following are budgeted for both departments in Safe Clinic for 2010: - Pharmacy Medical Records Department overhead cost RM225,000 RM300,000 No. of prescriptions filled (pharmacy) 80,000 - No. of patients visited (medical records) - 55,000 In June 2010, David Lim paid 2 visits to the clinic and had 4 prescriptions filled at the pharmacy. 1) Compute the budgeted departmental overhead rates for both departments. 2) Compute the total budgeted overhead cost applied to the patient, David Lim in June…arrow_forwardFour Seasons Industries has established direct labor performance standards for its maintenance and repair shop. However, some of the labor records were destroyed during a recent fire. The actual hours worked during August were 2,500, and the total direct labor budget variance was $1,300 unfavorable. The standard labor rate was $16 per hour, but recent resignations allowed the firm to hire lower-paid replacement worker for some jobs, and this produced a favorable rate variance of $3,500 for August. a. Calculate the actual direct labor rate paid per hour during August. b. Calculate the dollar amount of the direct labor efficiency variance for August. c. Calculate the standard direct labor hours allowed for the actual level of activity during August.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Managerial Accounting: The Cornerstone of Busines...AccountingISBN:9781337115773Author:Maryanne M. Mowen, Don R. Hansen, Dan L. HeitgerPublisher:Cengage Learning
Cornerstones of Cost Management (Cornerstones Ser...AccountingISBN:9781305970663Author:Don R. Hansen, Maryanne M. MowenPublisher:Cengage Learning
Managerial AccountingAccountingISBN:9781337912020Author:Carl Warren, Ph.d. Cma William B. TaylerPublisher:South-Western College Pub
Financial And Managerial AccountingAccountingISBN:9781337902663Author:WARREN, Carl S.Publisher:Cengage Learning,
Managerial Accounting: The Cornerstone of Busines...
Accounting
ISBN:9781337115773
Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:Cengage Learning
Cornerstones of Cost Management (Cornerstones Ser...
Accounting
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Cengage Learning
Managerial Accounting
Accounting
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:South-Western College Pub
Financial And Managerial Accounting
Accounting
ISBN:9781337902663
Author:WARREN, Carl S.
Publisher:Cengage Learning,
Inspection and Quality control in Manufacturing. What is quality inspection?; Author: Educationleaves;https://www.youtube.com/watch?v=Ey4MqC7Kp7g;License: Standard youtube license