St. Mark’s Hospital contains 450 beds. The average occupancy rate is 80% per month. In other words,on average, 80% of the hospital’s beds are occupied by patients. At this level of occupancy, the hospital’soperating costs are $32 per occupied bed per day, assuming a 30-day month. This $32 figure contains bothvariable and fixed cost elements.During June, the hospital’s occupancy rate was only 60%. A total of $326,700 in operating cost wasincurred during the month.Required:1. Using the high-low method, estimate:a. The variable cost per occupied bed on a daily basis.b. The total fixed operating costs per month.2. Assume an occupancy rate of 70% per month. What amount of total operating cost would you expectthe hospital to incur?
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
St. Mark’s Hospital contains 450 beds. The average occupancy rate is 80% per month. In other words,
on average, 80% of the hospital’s beds are occupied by patients. At this level of occupancy, the hospital’s
operating costs are $32 per occupied bed per day, assuming a 30-day month. This $32 figure contains both
variable and fixed cost elements.
During June, the hospital’s occupancy rate was only 60%. A total of $326,700 in operating cost was
incurred during the month.
Required:
1. Using the high-low method, estimate:
a. The variable cost per occupied bed on a daily basis.
b. The total fixed operating costs per month.
2. Assume an occupancy rate of 70% per month. What amount of total operating cost would you expect
the hospital to incur?
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