In the past,Hypochondriac Hospital allocated all of its overhead costs to patients based on nursing time.Hypochondriac has decided to switch to an activity based costing system using three activity cost pools.Information related to the new system is as follows: Data concerning two patients follows: Compared to the old system,which of the two patients X and Y will be charged more overhead cost under the new activity-based costing system?
A)neither patient will be charged more
B)Patient X
C)Patient Y
D)both Patient X and Patient Y

Question

In the past,Hypochondriac Hospital allocated all of its overhead costs to patients based on nursing time.Hypochondriac has decided to switch to an activity based costing system using three activity cost pools.Information related to the new system is as follows:  Data concerning two patients follows:  Compared to the old system,which of the two patients X and Y will be charged more overhead cost under the new activity-based costing system?
A)neither patient will be charged more 
B)Patient X 
C)Patient Y 
D)both Patient X and Patient Y

Quizplus · Accepted Answer

Overhead cost assigned to patients X and Y under the nursing time costing system:
 11eaa3fe_3360_96cd_908b_c710e6e7971f_TB2461_00 Predetermined overhead rate = Estimated total overhead ÷ Estimated total amount of the allocation base
= $1,095,000 ÷ 150,000 hours = $7.30 per hour
Overhead cost assigned to Patient X = $7.30 per hour × 100 hours = $730
Overhead cost assigned to Patient Y = $7.30 per hour × 60 hours = $438
Overhead cost assigned to patients X and Y under the activity-based costing system:
 11eaa3fe_3360_96ce_908b_49194cd79d8b_TB2461_00 
 11eaa3fe_3360_bddf_908b_51c9de6a0f80_TB2461_00

In the Past,Hypochondriac Hospital Allocated All of Its Overhead Costs