ExpertHard2 marksMultiple Choice
ACCA · Question 13 · Cost accounting techniques
A hospital uses Activity-Based Costing (ABC). The 'Patient Admission' cost pool has total overheads of $150,000. The cost drivers identified are the number of admissions. During the period, there were 3,000 routine admissions and 1,000 emergency admissions. Emergency admissions require twice as much administrative effort as routine admissions.
What is the cost per routine admission?
A hospital uses Activity-Based Costing (ABC). The 'Patient Admission' cost pool has total overheads of $150,000. The cost drivers identified are the number of admissions. During the period, there were 3,000 routine admissions and 1,000 emergency admissions. Emergency admissions require twice as much administrative effort as routine admissions.
What is the cost per routine admission?
Answer options:
A.
$30
B.
$37.50
C.
$50
D.
$60
How to approach this question
Calculate the total 'equivalent' routine admissions. 1 emergency = 2 routine. Total equivalent = 3,000 + 2,000 = 5,000. Divide total cost by total equivalent admissions.
Full Answer
A.$30✓ Correct
To find the cost driver rate, we must weight the activities. Routine = 3,000 units. Emergency = 1,000 * 2 = 2,000 units. Total weighted units = 5,000. Cost per unit (routine) = $150,000 / 5,000 = $30.
Common mistakes
Ignoring the weighting and just dividing by 4,000 total admissions.
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