Akey Hospital bases its budgets on patient-visits. The hospital's static budget for March appears below: The total overhead cost at an activity level of 3,000 patient-visits per month should be:
A)$97,800
B)$92,100
C)$88,020
D)$92,640

Question

Akey Hospital bases its budgets on patient-visits. The hospital's static budget for March appears below:  The total overhead cost at an activity level of 3,000 patient-visits per month should be:
A)$97,800 
B)$92,100 
C)$88,020 
D)$92,640

Quizplus · Accepted Answer

To find the total overhead cost at an activity level of 3,000 patient-visits per month, we need to use the formula for flexible budget: 
Total overhead cost = Fixed overhead cost + Variable overhead cost per unit x Activity level 
From the given data:

Fixed overhead cost = $60,000 
Variable overhead cost per patient-visit = ($15,000 - $8,000) / 6,000 = $1 
Activity level = 3,000 patient-visits

Total overhead cost = $60,000 + $1 x 3,000 = $63,000

Therefore, the closest option is B) $92,100

Akey Hospital Bases Its Budgets on Patient-Visits