Question

Sharkfin Healthcare bases its budgets on patient-visits. The hospital's static budget for October appears below:

Budgeted number of patient-visits		8,500
Budgeted variable overhead costs:
Supplies (@$4.70 per patient-visit)	$	39,950
Laundry (@$7.80 per patient-visit)		66,300
Total variable overhead cost		106,250
Budgeted fixed overhead costs:
Wages and salaries		50,150
Occupancy costs		84,150
Total fixed overhead cost		134,300
Total budgeted overhead cost	$	240,550

The total overhead cost at an activity level of 9,200 patient-visits per month should be:

Group of answer choices

A) $260,360

B) $250,070

C) $249,300

D) $240,550

Answer 1

Answer : (c) $249,300

Calculation :

Step 1 : Calculation of Variable overhead cost

Patient-visits = 9,200

Supplies costs = 9,200 * $4.70 per patient-visit = $43,240

Laundry costs = 9,200 * $7.80 per patient-visit = $71,760

Total Variable overhead costs = $43,240 + $71,760 = $115,000

Step 2 : Calculation of Fixed overhead cost

Wages and salaries = $50,150

Occupancy costs = $84,150

Total Fixed overhead costs = $50,150 + $84,150 = $134,300

Step 3 : Calculation of Total overhead cost

Total Overhead costs = Total Variable overhead costs + Total Fixed overhead costs

Total Overhead costs = $115,000 + $134,300 = $249,300

Note:

1. Variable cost varies with level of output. It is constant in per unit and varies in total.

2. Fixed cost does not varies with level of output. It is constant in total and varies in per unit.

All the best...