Pleasant Stay Medical Inc. wishes to determine its product costs. Pleasant Stay
ID: 2446071 • Letter: P
Question
Pleasant Stay Medical Inc. wishes to determine its product costs. Pleasant Stay offers a variety of medical procedures (operations) that are considered its “products.” The overhead has been separated into three major activities. The annual estimated activity costs and activity bases follow:
1
Activity
Budgeted Activity Cost
Activity Base
2
Scheduling and admitting
$432,000.00
Number of patients
3
Housekeeping
4,212,000.00
Number of patient days
4
Nursing
5,376,000.00
Weighted care unit
5
Total costs
$10,020,000.00
Total “patient days” are determined by multiplying the number of patients by the average length of stay in the hospital. A weighted care unit (wcu) is a measure of nursing effort used to care for patients. There were 192,000 weighted care units estimated for the year. In addition, Pleasant Stay estimated 6,000 patients and 27,000 patient days for the year. (The average patient is expected to have a a little more than a four-day stay in the hospital.)
During a portion of the year, Pleasant Stay collected patient information for three selected procedures, as follows:
Private insurance reimburses the hospital for these activities at a fixed daily rate of $406 per patient day for all three procedures.
(How to do #1: Activity cost ÷ Activity Base = Activity Rate; Sum all activity costs to determine a total cost.)
(How to do #2: Activity usage x Activity rate from Req. (1) = Activity cost; Sum all activity costs per product to determine a total for each procedure.)
(How to do #3: (Patient days x reimbursement rate per day) - Total activity cost from Req. 2 = Excess (deficiency) of reimbursement over activity cost.)
1
Activity
Budgeted Activity Cost
Activity Base
2
Scheduling and admitting
$432,000.00
Number of patients
3
Housekeeping
4,212,000.00
Number of patient days
4
Nursing
5,376,000.00
Weighted care unit
5
Total costs
$10,020,000.00
Explanation / Answer
Answer:1 Calculation of the Activity rate:
Answer:2 Calculation of the activity cost for each procedure.
Answer:3 Calculation of the excess or deficiency of reimbursements to activity cost.
Answer:4
1 Activity Budgeted Activity Cost Activity Base No. of activity Activity rate 2 Scheduling and admitting $432,000.00 Number of patients 6000 72 Per patients 3 Housekeeping 4,212,000.00 Number of patient days 27000 156 Per patients day 4 Nursing 5,376,000.00 Weighted care unit 192000 28 Per Weighted care units 5 Total costs $10,020,000.00