Reference no: EM133445406

Question: Mercy Hospital provides both medical services and in patient services such as meals and lodgining. The current costing system combines the costs of all of these services and divides by the total resident days to get a cost per resident day. Since medical services tend to vary widely across patients whereas meals and lodging costs stay consistent, Mercy Hospital wants to shift to any activity-based costing system to provide a more accurate cost per resident day. They plan to classify patients into four categories based on the level of services received - groups A, B, C and D. You are given the information below:

Patient                      Annual care Days                       Annual assistance hours              

A                                 18,000                                              9,100

B                                  10,000                                             22,500

C                                   5,500                                              23,000

D                                  3,000                                            18,400

total                               36,500                                    73,000

This year Mercy spent $4,927,500 on medical services and $2,591,000 on in patient services.

(a) Determine the cost of patient day under activity based costing for each category of patient using assistance hours as the cost driver for medical services and care days as the cost driver for in-patient services.