Reference no: EM132565502

ABC-A Service Application

Grand Haven is a senior living community that offers a full range of services including independent living, assisted living, and skilled nursing care. The assisted living division provides residential space, meals, and medical services (MS) to its residents. The current costing system adds the cost of all of these services (space, meals, and MS) and divides by total resident days to get a cost per resident day for each month. Recognizing that MS tends to vary significantly among the residents, Grand Haven's accountant recommended that an ABC system be designed to calculate more accurately the cost of MS provided to residents. She decided that residents should be classified into four categories (A, B, C, D) based on the level of services received, with group A representing the lowest level of service and D representing the highest level of service. Two cost drivers being considered for measuring MS costs are number of assistance calls and number of assistant contacts. A contact is registered each time an assistance professional provides medical services or aid to a resident. The accountant has gathered the following data for the most recent annual period:

Resident Classification              Annual Resident Days              Annual Assistance Hours                  Number of Assistance Contacts

A                                                  8,760                                         15,000                                      60,000

B                                                  6,570                                           20,000                                       52,000

C                                                    4,380                                             22,500                                   52,000

D                                                       2,190                                              32,500                               52,000

                                                             21,900                                              90,000                           216,000

Other data:

Total cost of medical services for the period $3,000,000

Total cost of meals and residential space $2,142,500

Question a. Determine the ABC cost of a resident day for each category of residents using assistance hours as the cost driver.

Round answer below to the nearest dollar.

Medical services cost per assistance hour $Answer

NOTE: Use your rounded answer above to compute answers below. Round final answers to the nearest dollar.

Per Day Costs

Medical Services Meals and Residential Total

Class A

Class B

Class C

Class D

Question b. Determine the ABC cost of a resident day for each category of residents using assistance contacts as the cost driver.

Round answer below to the nearest dollar.

Medical services cost per assistance contacts $Answer

NOTE: Use your rounded answer above to compute answers below. Round final answers to the nearest dollar.

Per Day Costs

Medical Services Meals and Residential Total

Class A

Class B

Class C

Class D