Cardinal Community Hospital Activity Based Costing Cardinal Community Hospital has found itself under increasing pressure to be accountable for the charges it assesses its patients. Its current pricing system is based on pricing norms for the geographical area, and it only explicitly considers direct costs for surgery, medication, and other treatments. Cardinal's controller has suggested that the hospital try to improve its pricing policies 5 by seeking a tighter relationship between costs and pricing. This approach would make prices for services less arbitrary. As a first step, the controller has determined that most costs can 3 be assigned to one of three cost pools. The three cost pools are shown below with the estimated amounts and activity cost drivers. 0 1 Activity Center Amount Activity Driver Quantity 2 Professional salaries $ 2,800,000 Professional hours 30,000 hours 13 Building costs 650,000 square feet used 15,000 sq. ft. 14 Risk management 420,000 Patients served 1,000 patients 15 $ 3,870,000 16 17 The hospital provides service in three broad categories. The services are listed below 18 with their volume measures for the activity centers. 19 20 Service Professional Hours Square Feet Number of Patients 21 Surgery 5,000 1,200 200 22 Housing patients 21,000 12,000 500 23 Outpatient care 4,000 1,800 300 24 25 Required: 26 1) Determine the activity rate for each activity center cost pool (per unit of activity). 27 2)Determine the total allocated cost for Surgery, Housing Patients, and Outpaient care. 28 3)Suppose, finally, the hospital decided to experiment with professional hours to charge patients for 29 services received. If a patient had an appendectomy which required 3 professional hours for the 30 surgery, 36 professional hours for housing the patient, and professional hours for outpaient care, 31 what would be the total estimated cost of the appendectomy? 32