Write a formal report for jake explaining the abc technique

Assignment Help Accounting Basics

Reference no: EM131983778

Problem

I-support runs two programmes for at risk patients: heart care and general well-being. The centre's budget for 2017 follows:

Professional salaries
5 physicians x $125,000 10 psychologists x $80,000 16 nurses x $60,000
$625,000 $800,000 $960,000
Total Costs
$2,385,000 $132,000 $136,500
$88,000 $40,000 $84,000
$2,865,500
Medical supplies
Rent and Clinic maintenance

Administrative costs to manage patient charts, food, laundry Staff Training (1 every 3 months)

Laboratory services

The Director of the centre, Jake Marshall, is keen on determining the cost of each programme. While at a recent symposium at University of Auckland, Jake heard of activity-based costing as a method to refine costing systems. He collected the following information but needs your help to understand how to apply this technique:

	Heart	Well-being	Total
Physicians	4	1	5
Psychologists	4	6	10
Nurses	6	10	16
Square metre of space occupied by each programme	9,000	12,000	21,000
No. of patients	50	60	110
Number of laboratory tests	1,400	700	2,100

Required:

Write a formal report for Jake, no longer than 3 pages long, explaining the ABC technique. Your report should include the following:

a) The benefits of implementing ABC at I-Support

b) An explanation of cost hierarchies (Identify the level of activities for the costs mentioned above)

c) An explanation of the cost-allocation bases that would be most appropriate for allocating indirect costs to the programmes at I-Support together with the calculation for the indirect cost rates.

d) Detailed calculation of the budgeted cost for each programme and the cost of each programme per patient.

e) An explanation of the factors other than cost that I-support should consider in allocating resources to its programmes?

Reference no: EM131983778

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