Activity-Based Product Costing

Exercise 7-40  Activity-Based Product Costing

Suppose that a surgical ward has gathered the following information for four nursing activities and two types of patients:

Patient Category

 DriverNormalIntensiveActivity Rate
Treating patientsTreatments6,4008,000$4.00
Providing hygienic careHygienic hours4,80017,6005.00
Responding to requestsRequests32,00080,0002.00
Monitoring patientsMonitoring hours6,00072,0003.00

Required:

1.       Determine the total nursing costs assigned to each patient category.

2.       Output is measured in patient days. Assuming that the normal patient category uses 8,000 patient days and the intensive patient category uses 6,400 patient days, calculate the nursing cost per patient day for each type of patient.

3.       CONCEPTUAL CONNECTION The supervisor of the surgical ward has suggested that patient days is the only driver needed to assign nursing costs to each type of patient. Calcu- late the charge per patient day (rounded to the nearest cent) using this approach and then explain to the supervisor why this would be a bad decision.

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