Question

A veterinarian uses activity-based costing to allocate overhead to patients. Two identified activities include the operating room expenses and cleaning expenses. Operating room expenses of $21,112 for the upcoming quarter will be allocated based on the hours spent in the operating room, which the veterinarian expects to total 100 hours. Estimated cleaning expenses of $14,667 for the upcoming quarter will be allocated based on the number of nights the patient spends in the office. The veterinarian expects to have patients spend a total of 1,342 nights.
a. Calculate the activity rate for the operating room expenses and the cleaning expenses.

b. If Nick Walters spends 5 hours in the operating room and 3 nights in the office, how much overhead will be allocated to the patient?

Answer 1

A)	Activity rate
	operating room expense
	= estimated operating room expense/hours spent
	21,112/100
	211.12	per hr spent
	Cleaning expense
	= estimated cleaning expense/number of patient nights
	14,667/1,342
	10.93	per night
B)	overhead allocated
	operating room expense 211.12*5				1056
	cleaning expense             10.93*3				33
	total overhead allocated				1088	answer