60.1K

Verified Solution

Link Copied!

Use the information below (Exhibit 12-14) to answer the following questions.

1. Calculate the per unit cost of an initial visit using both the (a) conventional and (b) ABC approaches.
2. Calculate the per unit cost of a regular visit using both the (a) conventional and (b) ABC approaches.
3. Calculate the per unit cost of an intensive visit using both the (a) conventional and (b) ABC approaches.

Exhibit 12-14
	Basic data and calculation of unit costs using a conventional approach				Total Cost by Visit Type
					Basic Data
					A		B		C		D
					Initial		Regular		Intensive		Total
					(Given)		(Given)		(Given)		(A + B + C)
			1	Number of visits	8,000		26,000		8,600		42,600
			2	Direct materials (etc.)	$40,000		$50,000		$65,000		$155,000
			3	Direct labor	$100,000		$120,000		$280,000		$500,000
			4	Estimated overhead (total is a given)							$229,000
			5	Cost / visit: conventional method
	Additional basic data		1) Basic data: annual projections of overhead costs by activity
					Cost Driver Information
				Activity	I		J		K
					Cost		Driver		Units
					(Given)		(Given)		(Given)
			6	Intake	$34,000		New visits		3,550	New visits
			7	Medical records	$35,000		Time spent		2,390	Hours
			8	Billing	$65,000		Time spent		5,400	Hours
			9	Other	$95,000		Visits		42,600	Visits
			10	Total	$229,000
			2) Basic data: actual annual operating results of cost drivers to be used to assign ABC overhead cost
					Visit Type
					M		N		O		P
					Initial		Regular		Intensive		Total
					(Given)		(Given)		(Given)		(M + N + O)
			11	New visits	2,500		700		350		3,550
			12	Medical records	600		640		1,150		2,390
			13	Billing	3,200		1,000		1,200		5,400
			14	Other	8,000		26,000		8,600		42,600

Answer & Explanation Solved by verified expert

See Answer