1.Short Stay Surgery uses a job costing system for all patients who have surgery. The clinic uses a normal costing system with operating hours as the allocation base. For the month of March, estimated total operating hours in the surgery suits were 3,200 hours. The estimated overhead costs for the suites were $640,000. Patient Sarah Handy was in surgery for 2.5 hours.
Other costs related to Handy’s surgery include:
Patient medicine$ 50
Cost of nurses250
Cost of supplies150
a.Determine the budgeted (i.e., estimated) overhead rate for the surgery suites. b.Determine the total costs for Handy’s surgery.
c.Short Stay Surgery would like to know which of its services is more profitable so that it can emphasize that service in advertisements. Discuss whether each of the following types of information is relevant for this product emphasis decision: 1)Direct labor (doctors and nurses)
2)Direct supplies and medicine
2. The Vegan Wagon is part of a chain of restaurants and has been losing money in past months. Part of the problem has been a decline in sales. However, sales are expected to pick up during the summer months. In March, for example, the loss was $2,250. Static BudgetActual
Cost of ingredients24,00022,750
Corporate cost allocation8,0006,500
Utilities 1,500 1,000
Income (Loss)$10,500$ (2,250)
The restaurant purchases ingredients directly from the chain and is charged in direct proportion to the number of meals served. Personnel paid by Vegan prepare and serve the food, tend the cash register, bus and clean tables, and wash dishes. The...