5-40    Volume-Based Versus ABC Overhead Rate Medical Arts Hospital (MAH) uses a hospital-wide overhead rate based on nurse-hours. The intensive care unit (ICU), which has 30 beds, applies over- head using patient-days. Its budgeted cost and operating data for the year follow:

 

 

Hospital Budget Information

 

Hospital total overhead                   $57,600,000

Hospital total nurse-hours                  1,152,000

 

 

 

Budget Cost Driver Information for ICU for the Month of June

 

Cost Pool Facilities and equipment	Budget Cost $2,400,000	Cost Driver Number of patient-days	Budget Cost Driver Activity 7,500
Nursing care	3,000,000	Number of nurse-hours	80,000

 

In June, MAH’s intensive care unit had the following operating data:

 

81,000 nurse-hours

7,250 patient-days

 

 

Required

1.    Calculate the ICU’s overhead costs for the month of June using

a.    The hospitalwide rate

b.    The ICU departmentwide rate

c.    The cost driver rates for the ICU department

2.    Explain the differences and determine which overhead assignment method is more appropriate.