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Lecture 10 Activity-Based Costing Example: The Dialysis Clinic.

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Presentation on theme: "Lecture 10 Activity-Based Costing Example: The Dialysis Clinic."— Presentation transcript:

1 Lecture 10 Activity-Based Costing Example: The Dialysis Clinic

2 Dialysis Clinic, Inc. Two types of Dialysis: Hemodialysis (HD)Peritoneal dialysis (PD) Equipment intensive, in-clinic treatment 3 treatments per week 102 patients $1.9 million in revenues self-administered, in- home treatment Daily treatment 62 patients $1.1 million in revenues

3 Dialysis Clinic, Inc. Cost Category Total Cost Alloc- ation Base Units of Allocation Base HDPDTotal Summary of Costs and Identification of Cost Drivers: Standard Supplies $664,900 Not applicable: these are direct costs Episodic Supplies $310,695

4 Dialysis Clinic, Inc. Cost Pool Total Cost Allocation Base Units of Allocation Base HDPDTotal Summary of Costs and Identification of Cost Drivers: Nursing RNs LPNs Admin. Tech.s Total $239, , , ,928 $883,280 RN FTEs LPN FTEs treatments dialyzer treatments , , ,967 14,343 Nursing RNs LPNs Admin. Tech.s Total $239, , , ,928 $883,280 RN FTEs LPN FTEs treatments dialyzer treatments , , ,967 14,343

5 Dialysis Clinic, Inc. Cost Pool Total Cost Alloca- tion Base Units of Allocation Base HDPDTotal Summary of Costs and Identification of Cost Drivers: General facility Admin Records Utilities Total $233, , ,219 40,698 $785,825 Sq ft patients treatmts Kilowatts 18, , ,295 11, ,624 99,405 30, , ,700

6 Dialysis Clinic, Inc. Cost Pool Total Cost Alloc- ation Base Units of Allocation Base HDPDTotal Summary of Costs and Identification of Cost Drivers: Dur- able equip- ment 137,046Nursing Svc Cost $661,966$221,314$883,280

7 Dialysis Clinic, Inc. Calculation of Overhead Rates: Cost PoolTotal costTotal Units of Allocation Base Overhead Rate Nursing RNs LPNs Admin Technicians Total $239, , , ,928 $883, ,967 14,343 $34,160 per RN FTE $21,267 per LPN FTE $3.29 per treatment $8.71 per dialyzer treatment

8 Dialysis Clinic, Inc. Calculation of Overhead Rates: Cost PoolTotal costTotal Units of Allocation Base Overhead Rate General Facility Admin Records Utilities Total $233, , ,219 40,698 $785,825 30, , ,700 $7.774 per sq ft $2,163 per patient $4.496 per treatmt $ per kilowatt

9 Dialysis Clinic, Inc. Calculation of Overhead Rates: Cost PoolTotal costTotal Units of Allocation Base Overhead Rate Durable equipment $137,046$883,280$ per nursing service dollar

10 Dialysis Clinic, Inc. Allocation of Costs using A.B.C.: Cost Category O/H Rate HD Units HD Cost PD Units PD Cost Standard supplies Episodic Supplies Direct cost $512,619 98,680 $152,281 $212,015

11 Dialysis Clinic, Inc. Allocation of Costs using A.B.C.: Cost Pool O/H Rate HD Units HD Cost PD Units PD Cost Nursing RNs LPNs Admin Tech.s Total 34,160 21, FTEs 15 FTEs 14,343* * treatments $170, ,998 47, ,928 $661, ,624 0 $68,320 85,066 67, ,314

12 Dialysis Clinic, Inc. Allocation of Costs using A.B.C.: Cost Pool O/H Rate HD Units HD Cost PD Units PD Cost general facility admin records utilities Total , ,900 sq ft 102 patient 14, ,295 $146, ,595 64,489 34,593 $466,610 11, ,624 99,405 $86, ,087 92,730 6, ,215

13 Dialysis Clinic, Inc. Allocation of Costs using A.B.C.: Cost Pool O/H Rate HD Units HD Cost PD Units PD Cost durable equip- ment $ per nursing dollar 661,966$102,785221,314$34,261

14 Dialysis Clinic, Inc. Summary of Costs: Cost CategoryHDPD Standard Supplies Episodic Supplies Nursing Services General Overhead Durable equipment Total $512,619 98, , , ,785 $1,842,660 $152, , , ,215 34,261 $939,086

15 Dialysis Clinic, Inc. Summary of profitability: HDPD Traditional Costing Revenue Direct Costs Indirect Costs Net Income Activity-Based Costing Revenue Direct Costs Indirect Costs Net Income $1,860, ,299 1,389,347 ($140,359) $1,860, ,299 1,231,361 $17,627 $1,146, , , ,388 $1,146, , ,790 $207,402

16 Dialysis Clinic, Inc. Summary of profitability: HDPD R.C.C. Costing Revenue Direct Costs Indirect Costs Net Income $1,860, ,299 1,117,463 $131,525 $1,146, , ,688 93,504


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