Puff Animal Hospital looks after the health of household pets such as dogs, cats, birds and rabbits. The hospital wants to use an activity based costing system to allocate costs to each animal case it handles. These cases tend to vary in their complexity: some pets are here for a regular check ups and immunisation; other pets have emergencies that require surgery. Some pets are very exotic and require the attention of the supervisor vet; others are common animals with common problems such that only the junior vets are needed. Puff Animal Hospital is quite large; on average there are five vets, a general assistant, and two receptionists on duty at one time.
Which of the following is NOT a reason that supports the use of activity-based costing at Puff Animal Hospital?

Question

Quizplus · Accepted Answer

While tracing the time spent by each vet on different animals may be a useful component of an activity-based costing system, it is not the only reason to adopt such a system. A better reason might be the fact that the hospital handles a variety of different activities for cases that vary in complexity or that it has a large number of indirect costs. The need to use different facilities depending on the type of animal case is also a valid reason to use activity-based costing.

Puff Animal Hospital Looks After the Health of Household Pets