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Cost System Choices, Budgeting, and Variance Analyses for Sacred Heart Hospital

Cost System Choices, Budgeting, and Variance Analyses for Sacred Heart Hospital

Two Cost Systems

Sacred Heart Hospital (SHH) faces skyrocketing nursing costs, all of which relate to its two biggest nursing service lines - the Emergency Room (ER) and the Operating Room (OR). SHH's current cost system assigns total nursing costs to the ER and OR based on the number of patients serviced by each line. Total hospital annual nursing costs for these two lines are expected to equal $300,000. The table below shows expected patient volume for both lines.

Measure ER OR Total
*Number of patients (ER visit or surgeries) 1,000 1,000 2,000
Number of vital signs checks 2,000 4,000 6000
Number of nursing hours 10,000 5,000 15,000

1. Using the current cost system, calculate the hospital-wide rate based on number of patients. If required, round your answer to the nearest cent.

$ per patient

2. Calculate the amount of nursing costs that the current cost system assigns to the ER and to the OR.

The nursing cost, assigned to the ER

$

The nursing cost, assigned to the OR

$

Solution Preview

Total nursing costs $300,000

Number of patients
ER 1,000
OR 1,000
Total 2,000 ...

Solution Summary

The following posting helps with problems involving cost system choices, budgeting and variance analyses.

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