Chat_2a - E14-16 Page 528 Hospital Bill $4,800 Days 2 Roll...

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Unformatted text preview: E14-16 Page 528 Hospital Bill $4,800 # Days 2 Roll of Cotton Charge $11.52 Roll of Cotton Cost Low $2.20 Roll of Cotton Cost Low $3.00 Hospital Bill Breakdown A Cotton Roll $2.40 B Purchase Processing $0.60 C Supplies Room Mgmt Fee $0.70 D Handling Costs $1.60 E Admin Hospital Costs $1.10 F University Teaching Costs $0.60 G Malpractice Insurance Costs $1.20 H Uninsured Patients Cost $2.72 I Profit Component $0.60 Total $11.52 1Overhead Rate Computation Direct Costs $2.40 Indirect Costs $9.12 Overhead rate = Indirect/Direct 380% 2. Overhead Cost Item Allocation Criteria Processing of paperwork for purchase Cause and effect Supplies room management fee Benefits received Operating-room and patient-room handling costs Cause and effect Administrative hospital costs Benefits received University teaching-related costs Ability to bear Malpractice insurance costs Ability to bear or benefits received Cost of treating uninsured patients Ability to bear Profit component 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. A B C D 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 E15-17 Page 565 Budgeted Actual Costs of truck fleet $115,000 $96,750 30 30 20 15 1a. $115,000 50 Indirect costs allocated to Dark C Division = $ round trip x trips $2,300 30 Indirect costs allocated to Milk C Division = $ round trip x trips $2,300 20 1b. Indirect costs allocated to Dark C Division = $ round trip x trips $2,300 30 Indirect costs allocated to Milk C Division = $ round trip x trips $2,300 15 1c. Actual rate = Actual indirect costs / actual trip $96,750 45 Indirect costs allocated to Dark C Division = $ trip x act trips $2,150 30 Indirect costs allocated to Milk C Division = $ trip x act trips $2,150 15 2....
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Chat_2a - E14-16 Page 528 Hospital Bill $4,800 Days 2 Roll...

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