- Problem 5 23 Plantwide Versus Multiple Predetermined Overhead Rates Service Industry Lo2 Lo3 Lo5 Mccullough Regiona 1 (71.26 KiB) Viewed 59 times
Problem 5-23 Plantwide versus Multiple Predetermined Overhead Rates: Service Industry [LO2, LO3, LO5] McCullough Regional Medical Centre 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 labour 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 labour 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 accuracy of the costs allocated to patients. The first overhead rate would include all overhead costs within the Intensive Care Unit (ICU) and the second overhead rate would include all Other overhead costs. Information pertaining to the hospital's estimated number of patient-days, its estimated overhead costs, and two of its patients-Patient A and Patient B-is provided below: ICU 1,980 Estimated number of patient-days Other 32,520 $ 8,498,770 $ 60 Estimated fixed overhead cost $ 2,949,000 $ 350 Estimated variable overhead cost per patient-day Direct materials. Patient A $ 3,890 $27,810 20 Patient B $ 7,040 $34,150 Direct labour Total number of patient days (including ICU) 20 of tient days spent in ICU 10 Required: 1. Assuming McCullough calculates two overhead rates as recommended by the staff accountant, calculate: a. The ICU and Other overhead rates. b. The total cost, including direct materials, direct labour, and applied overhead, assigned to Patient A and Patient B. 2. Assuming McCullough continues to use only one predetermined overhead rate, calculate a. The predetermined overhead rate. b. The total cost, including direct materials, direct labour, and applied overhead, assigned to Patient A and Patient B. (Round your Intermediate calculations and final answers to 2 decimal places.)
Required: 1. Assuming McCullough calculates two overhead rates as recommended by the staff accountant, calculate: a. The ICU and Other overhead rates. b. The total cost, including direct materials, direct labour, and applied overhead, assigned to Patient A and Patient B. 2. Assuming McCullough continues to use only one predetermined overhead rate, calculate a. The predetermined overhead rate. b. The total cost, including direct materials, direct labour, and applied overhead, assigned to Patient A and Patient B. (Round your Intermediate calculations and final answers to 2 decimal places.) 1a. Predetermined ICU overhead rate per patient-day per patient-day Predetermined Other overhead rate 1b. Total cost for patient A Total cost for patient B 2a. Predetermined overhead rate per patient-day 2b. Total cost for patient A Total cost for patient B