Question

Month	Hospital Overhead Cost	Nursing Hrs	# of Patient Days	Overhead Cost Per Nursing Hrs	Overhead cost Per Patient Day
July	965,000	51,000	8,000	18.92	120.63
August	1,000,000	53,000	9,000	18.86	111.11
September	830,000	38,000	8,750	21.84	94.86
October	925,000	43,000	7,000	21.51	132.14
November	1,100,000	65,000	12,000	16.92	91.67
December	900,000	42,000	7,900	21.42	113.92

1. Graph the hospital’s overhead costs against the number of patient days.

2. Graph the hospital’s overhead costs against nursing hours.

3. Based on the graphs that you drew, do the data appear to be straight forward or do you see any potential problems with the data (i.e, do the data points form straight lines)? Please explain.

Answer 1

The lines are not straight forward. For the month July and September there is a significant difference in the overhead cost per nursing hour and patient day. For 8000 it is 965,000 which is higher than 8750 days. The data needs to be re-evaluated to check the overhead allocation basis used and the consistency of the apprortionment whether based on absorption costing or ABC.