Question:
(OH allocation using cost drivers) Regis Place is a health-care facility that has been allocating its overhead costs to patients based on number of patient days. The facility's overhead costs total $3,620,400 per year and the facility (which operates monthly at capacity) has a total of 60 beds available. (Assume a 360-day year.) The facility's accountant is considering a new overhead allocation method using the following information:
|
Cost
|
Cost Driver
|
Quantity
|
|
Rooms (depreciation, cleaning, etc.)
|
$ 504,000
|
# of rooms (25 double)
|
35
|
|
Laundry
|
151,200
|
# of beds
|
60
|
|
Nursing care
|
1,314,000
|
# of nurse-hours annually
|
43,800
|
|
Physical therapy
|
960,000
|
# of hours of rehab
|
8,000
|
|
General services
|
691,200
|
# of patient days
|
|
Rooms are cleaned daily; laundry for rooms is done, on average, every other day.
a. How many patient days are available at Regis Place?
b. What is the overhead rate per patient day? (Round to the nearest dollar.)
c. Using the individual cost drivers, what is the overhead rate for each type of cost? (Round to the nearest dollar.)
d. Assume a patient stayed at Regis Place for six days. The patient was in a single room and required 30 hours of physical therapy. What overhead cost would be assigned to this patient under the current method of overhead allocation? What overhead cost would be assigned to this patient under the ABC method of over-head allocation?
e. Assume a patient stayed at Regis Place for six days. The patient was in a double room and did not require any physical therapy. What overhead cost would be assigned to this patient under the current method of overhead allocation? What overhead cost would be assigned to this patient under the ABC method of over-head allocation?