Activity-Based Costing for a Service Company
Crosswinds Hospital plans to use activity-based costing toassign hospital indirect costs to the care of patients. Thehospital has identified the following activities and activity ratesfor the hospital indirect costs:
| Activity | | Activity Rate |
| Room and meals | $240 | per day |
| Radiology | $215 | per image |
| Pharmacy | $50 | per physician order |
| Chemistry lab | $80 | per test |
| Operating room | $1,000 | per operating room hour |
The activity usage information associated with the two patientsis as follows:
| Abel Putin | Cheryl Umit |
| Number of days | | 6 days | | 4 days |
| Number of images | | 4 images | | 3 images |
| Number of physician orders | | 6 orders | | 2 orders |
| Number of tests | | 5 tests | | 4 tests |
| Number of operating room hours | | 8 hours | | 4 hours |
a. Determine the activity cost associated witheach patient.
b. Why is the total activity cost different forthe two patients?
Abel Putin apparently had a different condition thatrequired more extensive treatment. Thus, the activity cost to AbelPutin is nearly two times that of otherpatient.
