Activity-based costing for a service company
Crosswinds Hospital plans to use activity-based costing to assign hospital indirect costs to the care of patients. The hospital has identified the following activities and activity rates for the hospital indirect costs:
Activity Activity Rate
Room and meals $188 per day
Radiology $265 per image
Pharmacy $57 per physician order
Chemistry lab $92 per test
Operating room $960 per operating room hour
The activity usage information associated with the two patients is as follows:
Line Item Description Abel Putin Cheryl Umit
Number of days 4 days 8 days
Number of images 2 images 7 images
Number of physician orders 6 orders 8 orders
Number of tests 4 tests 7 tests
Number of operating room hours 4.5 hours 6 hours
a. Determine the activity cost associated with each patient.
Abel Putin fill in the blank 1 of 2$
Cheryl Umit fill in the blank 2 of 2$
b. Why is the total activity cost different for the two patients?
fill in the blank 1 of 2
apparently had a different condition that required more extensive treatment. Thus, the activity cost to fill in the blank 2 of 2
is more than the activity cost of the other patient.