McCullough Hospital uses a job order costing system to

assign costs

McCullough Hospital uses a job-order costing system to assign costs to its patients. Its direct
materials include a variety of items such as pharmaceutical drugs, heart
GET THE ANSWER>> https://solutionlly.com/downloads/mccullough-hospital-uses-a-job-order-
costing-system-to-assign-costs

McCullough Hospital uses a job-order costing system to assign costs to its patients. Its direct
materials include a variety of items such as pharmaceutical drugs, heart valves, artificial hips,
and pacemakers. Its direct labor costs (e.g., surgeons, anesthesiologists, radiologists, and
nurses) associated with specific surgical procedures and tests are traced to individual patients.
All other costs, such as depreciation of medical equipment, insurance, utilities, incidental
medical supplies, and the labor costs associated with around-the-clock monitoring of patients
are treated as overhead costs.

Historically, McCullough has used one predetermined overhead rate based on the number of
patient-days (each night that a patient spends in the hospital counts as one patient-day) to
allocate overhead costs to patients. Recently a member of the hospital's accounting staff has
suggested using two predetermined overhead rates (allocated based on the number of patient-
days) to improve the accuracy of the costs allocated to patients. The first overhead rate would
include all overhead costs within the Intensive Care Unit (ICU) and the second overhead rate
would include all Other overhead costs. Information pertaining to the hospital's estimated
number of patient-days, its estimated overhead costs, and two of its patients-Patient A and
Patient B-is provided below:

Required:

1/2
 1. Assuming McCullough uses only one predetermined overhead rate, calculate:

a. The predetermined overhead rate.

b. The total cost, including direct materials, direct labor and applied overhead, assigned to
Patient A and Patient B.

2. Assuming McCullough calculates two overhead rates as recommended by the staff

accountant, calculate:

a. The ICU and Other overhead rates.

b. The total cost, including direct materials, direct labor and applied overhead, assigned to
Patient A and Patient B.

3. What insights are revealed by the staff accountant's approach?

McCullough Hospital uses a job order costing system to assign costs

GET THE ANSWER>> https://solutionlly.com/downloads/mccullough-hospital-uses-a-job-order-
costing-system-to-assign-costs

2/2
Powered by TCPDF (www.tcpdf.org)