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Problem - 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
$240
per day
Radiology
$215
per image
Pharmacy
$50
per physician order
Chemistry lab
$80
per test
Operating room
$1,000
per operating room hour
The activity usage information associated with the two patients is as follows:
Abel Putin
Cheryl Umit
Number of days
6 days
4 days
Number of images
4 images
3 images
Number of physician orders
6 orders
2 orders
Number of tests
5 tests
4 tests
Number of operating room hours
8 hours
4 hours
Required -
a. Determine the activity cost associated with each patient.
b. Why is the total activity cost different for the two patients?
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