Week 2 Chat Solutions

# Week 2 Chat Solutions - Week2ChatSolutions 14-16(15-20 min...

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Week 2 Chat Solutions 14-16 (15-20 min.) Cost allocation in hospitals, alternative allocation criteria. 1. Direct costs = \$2.40 Indirect costs (\$11.52 – \$2.40) = \$9.12 Overhead rate = = 380% 2. The answers here are less than clear-cut in some cases. Overhead Cost Item Allocation Criteria Processing of paperwork for purchase Supplies room management fee Operating-room and patient-room handling costs Administrative hospital costs University teaching-related costs Malpractice insurance costs Cost of treating uninsured patients Profit component Cause and effect Benefits received Cause and effect Benefits received Ability to bear Ability to bear or benefits received Ability to bear None. This is not a cost. 3. Assuming that Meltzer’s insurance company is responsible for paying the \$4,800 bill, Meltzer probably can only express outrage at the amount of the bill. The point of this question is to note that even if Meltzer objects strongly to one or more overhead items, it is his insurance company that likely has the greater incentive to challenge the bill. Individual patients have very little power in the medical arena. In contrast, insurance companies have considerable power and may decide that certain costs are not reimbursable for example, the costs of treating uninsured patients.

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15-17 (20–25 min.) Single-rate method, budgeted versus actual costs and quantities. 1. a. Budgeted rate = = \$115,000/50 trips = \$2,300 per round-trip Indirect costs allocated to Dark C. Division = \$2,300 per round-trip 30 budgeted round trips = \$69,000 Indirect costs allocated to Milk C. Division = \$2,300 per round-trip 20 budgeted round trips = \$46,000 b. Budgeted rate = \$2,300 per round-trip Indirect costs allocated to Dark C. Division = \$2,300 per round-trip 30 actual round trips = \$69,000 Indirect costs allocated to Milk C. Division = \$2,300 per round-trip 15 actual round trips = \$34,500 c. Actual rate = = \$96,750/ 45 trips = \$2,150 per round-trip
Indirect costs allocated to Dark C. Division = \$2,150 per round-trip 30 actual round trips = \$64,500 Indirect costs allocated to Milk C. Division = \$2,150 per round-trip 15 actual round trips = \$32,250 2. When budgeted rates/budgeted quantities are used, the Dark Chocolate and Milk Chocolate Divisions know at the start of 2012 that they will be charged a total of \$69,000 and \$46,000 respectively for transportation. In effect, the fleet resource becomes a fixed cost for each

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Week 2 Chat Solutions - Week2ChatSolutions 14-16(15-20 min...

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