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- This topic has 1 reply, 2 voices, and was last updated 6 years ago by John Moffat.
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- November 30, 2017 at 6:22 am #419092
Hi there !
(ACCA JUNE 15 PAST PAPER )
Beckley Hill (BH) is a private hospital carrying out two types of procedures on patients. Each type of procedure incurs
the following direct costs:
Procedure A B
$ $
Surgical time and materials 1,200 2,640
Anaesthesia time and materials 800 1,620
BH currently calculates the overhead cost per procedure by taking the total overhead cost and simply dividing it by
the number of procedures, then rounding the cost to the nearest 2 decimal places. Using this method, the total cost
is $2,475·85 for Procedure A and $4,735·85 for Procedure B.
Recently, another local hospital has implemented activity-based costing (ABC). This has led the finance director at BH
to consider whether this alternative costing technique would bring any benefits to BH. He has obtained an analysis
of BH’s total overheads for the last year and some additional data, all of which is shown below:
Cost Cost driver $
Administrative costs Administrative time per procedure 1,870,160
Nursing costs Length of patient stay 6,215,616
Catering costs Number of meals 966,976
General facility costs Length of patient stay 8,553,600
–––––––––––
Total overhead costs 17,606,352
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Procedure A B
No. of procedures 14,600 22,400
Administrative time per procedure (hours) 1 1·5
Length of patient stay per procedure (hours) 24 48
Average no. of meals required per patient 1 4I cant understand how to calculate/deal with CATERING COSTS and cant calculate its cost driver !
November 30, 2017 at 1:33 pm #419191The question tells you what the cost driver is – it is the number of meals!
You also know the average number of meals for each procedure and the number of procedures. So the total meals for procedure A is 14600 x 1 = 14600, and for procedure B is 22,400 x 4 = 89,600. So the total number of meals is 104,200.
So the catering cost per meal is 966,976/104,200 = $9.28(Please do not type out whole questions like this – it is breaking ACCA copyright, and they get annoyed! Just give the date of the exam and the name or number or the question – I have all the past exam questions and answers 🙂 )
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