Explore BrainMass

Activity Based Costing in a Dialysis Clinic

A dialysis clinic offers two services hemiodialysis(HD) and peridoneal dialysis (PD). HD requires patients to come to the clinic three time a week to receive treatment. PD allows patients to administer their own treatment daily in their own homes. The profit analysis of the two services follows:

Total HD PD
Revenues 3,006,775 1,860,287 1,146,488
Total revenue

Analyzed service costs 649,900 512,619 152,281
Standard supplies 310,695 98,680 212,015
Episodic supplies 785,825
General overhead

Unanalyzed service costs
Durable equipment 137,046 116,489 20,557
Nursing services 883,280 750,788 132,492

Activity Costs Cost Driver HD useage PD Usage
Facility costs 233,226 Sq Footage 18,900 11,100
Support Staff 354,682 Number of patients 102 62
Communications 157,219 Number of treatments 14,343 20,624
Utilities 40,698 Kilowatt usage 563,295 99,405


What is the profitability of the two services under ABC? Calculate the average cost per treatment using ABC.

See attached file for full problem description.


Solution Summary

This solution calculates the profitability of the two services under activity based costing and also the average cost per treatment. All calculations and formulas are shown enclosed in an Excel file.