Volume-Based Versus ABC Overhead Rate: Medical Arts Hospital (MAH) Uses

Essay

Volume-based Versus ABC Overhead Rate: Medical Arts Hospital (MAH) uses a hospital-wide overhead rate based on nurse-hours.The intensive care unit (ICU), which has 30 beds, applies over­head using patient-days.Its budgeted cost and operating data for the year follow: $$\begin{array} { | l | r | } \hline { \text { Hospital Budget Information } } \\\hline \text { Hospital total overhead } & \$ 57,600,000 \\\hline \text { Hospital total nurse-hours } & 1,152,000 \\\hline\end{array}$$ Required:
1.Calculate the ICU's overhead costs for the month of June using
a.The hospital-wide rate
b.The ICU department-wide rate
c.The cost driver rates for the ICU department
2.Explain the differences and determine which overhead assignment method is more appropriate