ExpertMedium2 marksShort Answer
ACCA · Question 07 · Specialist cost and management accounting techniques
Section A
MediCare Clinic uses Activity-Based Costing (ABC). The 'patient admission' cost pool totals $120,000. The cost driver is the number of admissions. The clinic expects 4,000 standard admissions and 1,000 emergency admissions. Emergency admissions require twice as much administrative effort as standard admissions.
What is the cost per standard admission? (Enter your answer as a whole number).
Section A
MediCare Clinic uses Activity-Based Costing (ABC). The 'patient admission' cost pool totals $120,000. The cost driver is the number of admissions. The clinic expects 4,000 standard admissions and 1,000 emergency admissions. Emergency admissions require twice as much administrative effort as standard admissions.
What is the cost per standard admission? (Enter your answer as a whole number).
How to approach this question
1. Calculate total weighted admissions: (4,000 * 1) + (1,000 * 2). 2. Divide total cost pool by total weighted admissions to find the cost per standard admission.
Full Answer
Standard admissions = 4,000 * 1 = 4,000 weighted units.
Emergency admissions = 1,000 * 2 = 2,000 weighted units.
Total weighted units = 6,000.
Cost per weighted unit (standard admission) = $120,000 / 6,000 = $20.
Common mistakes
Simply dividing $120,000 by 5,000 total admissions, ignoring the different effort levels.
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