Mercy Hospital plans to use activity-based costing to assignhospital indirect costs to the care of patients. The hospitalhas indentified the following activities and activity rates for thehospital indirect costs:
Activity Activity Rate
Room andmeals $165 per day
Radiology $250 per image
Pharmacy $45 per physician order
Chemistrylab $85 per test
Operatingroom $680 per operating room hour
The records of two representative patients were analyzed, usingthe activity rates. The activity information associated withthe two patients is as follows:
PatientMalone Patient Talbot
Number ofdays 8days 4 days
Number ofimages 5images 3 images
Number of physicianorders 6orders 2 orders
Number oftests 7tests 3 tests
Number of operating roomhours 4.5hours 2 hours
- Determine the activity cost associated with each patient.
- Why is the total activity cost different for the twopatients?