Essentials Of Cost Accounting For Health Care Organizations 3rd Edition by Steven Finkler, David Ward,Judith Baker

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The surgical nursing department currently allocates all costs based on an average overall cost per patient day. For last month, there were $1,000,000 of costs, and 2,000 patient days. Therefore, the cost per patientday was $500.
Costs were as follows:
The CFO of the hospital argues that activitybased costing (ABC) would generate more accurate cost allocations. The CFO wants to allocate costs as follows: (i) nursing time will be the cost driver for all personnel relatedcosts; (ii) patient type will be the cost driver for supplies; and (iii) other expenses will be allocated based on patient days.
There are three types of patients: A, B and C. A special cost study yields the following information:
The Patient Classification System indicates the following average nursing time per patient- day:
Use ABC to determine the cost per patient for each of these three types of patients and compare these costs to a cost allocation system based solely on patient days. Be specific about any assumptions that you make and show all of your work in a logical fashion.