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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
–––––––––––
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 4
Required:
(a) Calculate the full cost per procedure using activity-based costing.
(b) Making reference to your findings in part (a), advise the finance director as to whether activity-based costing
should be implemented at BH.There is no point in simply typing out a full question and expecting me to provide you with a full answer.
You must have an answer in the same book in which you found the questions, and so ask about whatever it is in the answer you are not clear about – then I will explain.
(Unless, of course, you have been set this as a ‘test’ question, in which case we certainly do not do your homework for you 🙂 )Everything needed to be able to answer this question is fully explained in my free lectures. The lectures are a complete free course for Paper PM and cover everything needed to be able to pass the exam.
In addition, although ABC is obviously examined in Paper PM (and therefore you should be able to answer this question), the new exam structure means that you cannot possibly be asked this question as you have typed it! ABC is only examined in Sections A and B of the exam and so you can only be asked on specific parts of the question – you cannot be asked the whole question!
Dovahkin(DK) 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
DKcurrentlycalculatestheoverheadcostperprocedurebytakingthetotaloverheadcostandsimplydividingitby 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 DK. He has obtained an analysis of
DK’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
–––––––
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 4
Required:
(a) Calculate the full cost per procedure using activity-based costing.
(b) Making reference to your findings in part (a), advise the finance director as to whether activitybased costing should be implemented at Dovahkin.how can i calculate this
Have you not read my reply above to the previous question???
We do not do your assignments for you – that would be really silly given that you are supposed to learn the topic 🙂
As I wrote before – you are wasting your time typing out full questions and expecting me to provide a full answer. You should be attempting questions from a Revision Kit from one of the ACCA approved publishers – they contain full answer together with explanations. If you have any problem with the printed answer then by all means ask about it and I will explain.
Everything needed to be able to answer the question is explained in detail in my free lectures. (The lectures are a complete free course for Paper PM and cover everything needed to be able to pass the exam well.)
I suggest that you watch my lectures and then attempt the question yourself!
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