Step 1: Re-evaluate the level of production requirement
As a result of the implementation the new information system, which facilitates the information flows among the different departments in the Hospital, production efficiency can be promoted. The level of inputs required, e.g. labor, materials, and for other operating activities, are expected to fall. Thus, Stone should request the billing operations to re-estimate and obtain the most updated standards costs and quantities.
Step 2: Search for suppliers of inputs
As indicated in part A, there is an unfavorable variable cost rate variance. This can be caused by paying more or used more overhead items than budgeted. The actual pricing of the current suppliers is higher than the standard set. …show more content…
They should calculate the total overhead costs associated with the operation, including variable and fixed costs.
Step 4: Identify cost-allocation bases
Currently, Vaughan General Hospital has only 1 cost-allocation base, which is the patient bill. However, as a metropolitan health-care complex, Vaughan General Hospital provides a wide range of services to the public. Each service and supporting departments are associated with different inputs and overhead activities. For instance, the new information system does not only serve the service-providing departments but other the back office. Thus, the Hospital should separate cost-allocation bases rather than treating all patient bills the same. These can allow Stone and the Hospital to allocated costs more accurately.
Step 5: Identify variable costs allocated to each cost-allocation base
Subsequently, with the identification of cost-allocation bases, the billing operations group should now allocate the variable and fixed overhead costs related to each of the bases. Overall, the billing operations groups will be able to obtain the total budget requirement and the rate of costs per each output produced (patient
As a result of the implementation the new information system, which facilitates the information flows among the different departments in the Hospital, production efficiency can be promoted. The level of inputs required, e.g. labor, materials, and for other operating activities, are expected to fall. Thus, Stone should request the billing operations to re-estimate and obtain the most updated standards costs and quantities.
Step 2: Search for suppliers of inputs
As indicated in part A, there is an unfavorable variable cost rate variance. This can be caused by paying more or used more overhead items than budgeted. The actual pricing of the current suppliers is higher than the standard set. …show more content…
They should calculate the total overhead costs associated with the operation, including variable and fixed costs.
Step 4: Identify cost-allocation bases
Currently, Vaughan General Hospital has only 1 cost-allocation base, which is the patient bill. However, as a metropolitan health-care complex, Vaughan General Hospital provides a wide range of services to the public. Each service and supporting departments are associated with different inputs and overhead activities. For instance, the new information system does not only serve the service-providing departments but other the back office. Thus, the Hospital should separate cost-allocation bases rather than treating all patient bills the same. These can allow Stone and the Hospital to allocated costs more accurately.
Step 5: Identify variable costs allocated to each cost-allocation base
Subsequently, with the identification of cost-allocation bases, the billing operations group should now allocate the variable and fixed overhead costs related to each of the bases. Overall, the billing operations groups will be able to obtain the total budget requirement and the rate of costs per each output produced (patient