Reference no: EM13987498

Limon Hospital has two types of patients: normal care and intensive care. On a daily basis, both types of patients consume resources necessary for their care. For example, they occupy beds, receive nursing help, use care supplies (lotion, gauze, tissues, etc.), have bedding, towels, and clothes laundered, eat meals, etc. Bill Simons, the hospital administrator, wants to calculate the cost per patient day for each type of patient.

To illustrate how daily care costs can be assigned to each type of patient, infor- mation has been gathered for nursing care. There are always four nurses on duty.

There are three shifts, each lasting eight hours. Nurses work 40 hours per week and are paid an average of $45,000 per year, including benefits. Full-time nurses work 50 weeks per year. The hospital employs only one part-time nurse, who is paid $22,500 for the hours worked during the year (only the amount needed to ensure that the four-nurse coverage policy is satisfied). Assume that a year is exactly 52 weeks. Dur- ing the year, normal-care patients accounted for 8,000 patient days, and intensive- care patients accounted for 2,000 patient days. Intensive-care patients use half of the nursing care hours.

Required

1. Calculate the nursing cost per patient day for each patient type using patient days to assign the cost.

2. Calculate the nursing cost per patient day for each patient type using nursing hours used to assign the cost. Is this cost assignment more accurate than the one using patient days? Explain your reasoning.

3. Suppose that one nurse on each shift is dedicated to the intensive care unit and that the other three nurses provide additional help as needed. What additional information would you like to have to assign nursing costs so that a cost per patient day can be calculated for each patient type? Which of the three assign- ment methods are you using?

4. Suppose that the hospital administrator asks you to calculate the cost of laundry per patient day for each patient type. Describe how you would assign laundry cost, and specify the information that would be needed to do so. Did you use direct tracing or driver tracing? Explain.