Need help using ABC product costing model. Grand Haven is a senior living community that offers a full range of services including independent living, assisted living, and skilled nursing care. The asssited living division provides residential space, meals, and medical services (MS) to its residents. The current costing system adds the cost of all of these services (space, meals, and MS) and divides by total resident days to get a cost per resident day for each month. Recognizing that MS tends to vary significantly among the residents, Grant Haven's accountant recommended that an ABC system be designed to calculate more accurated the cost of MS provided to residents. She decided that residents should be classified into four categories (A, B, C, D) based on the level of services received, with group A representing the lowest level of services and D representing the highest level of service. Two cost drivers being considered for measuring MS costs are number of assistance calls and number of assistant contacts. A contact is registered each time an assistance professional provides medical services or aid to a resident. The accountnat has gathered the following data for the most recent annual period: Residential Classification Annual Resident Day Annual Assistance Hours Number of Assistance Contacts A 8,760 15,000 60,000 B 6,570 20,000 52,000 C 4,380 22,500 52,000 D 2,190 32,500 52,000 Total 21,900 90,000 216,000 Other data: Total cost of medical services for the period $5,000,000 Total cost of meals and residential space $3,280,000 Problems: a) Determine the ABC cost of a resident day for each category of residents using assistance hours as the cost driver. b) Determine the ABC cost of a resident day for each category of residents using assistant contacts as the cost driver. c) Which cost driver do you think provides the more accurate measure of the cost per day for a Grand Haven resident?
Need help using ABC product costing model.
Grand Haven is a senior living community that offers a full range of services including independent living, assisted living, and skilled nursing care. The asssited living division provides residential space, meals, and medical services (MS) to its residents. The current costing system adds the cost of all of these services (space, meals, and MS) and divides by total resident days to get a cost per resident day for each month. Recognizing that MS tends to vary significantly among the residents, Grant Haven's accountant recommended that an ABC system be designed to calculate more accurated the cost of MS provided to residents. She decided that residents should be classified into four categories (A, B, C, D) based on the level of services received, with group A representing the lowest level of services and D representing the highest level of service. Two cost drivers being considered for measuring MS costs are number of assistance calls and number of assistant contacts. A contact is registered each time an assistance professional provides medical services or aid to a resident. The accountnat has gathered the following data for the most recent annual period:
| Residential Classification | Annual Resident Day | Annual Assistance Hours | Number of Assistance Contacts |
| A | 8,760 | 15,000 | 60,000 |
| B | 6,570 | 20,000 | 52,000 |
| C | 4,380 | 22,500 | 52,000 |
| D | 2,190 | 32,500 | 52,000 |
| Total | 21,900 | 90,000 | 216,000 |
Other data:
| Total cost of medical services for the period | $5,000,000 |
| Total cost of meals and residential space | $3,280,000 |
Problems:
a) Determine the ABC cost of a resident day for each category of residents using assistance hours as the cost driver.
b) Determine the ABC cost of a resident day for each category of residents using assistant contacts as the cost driver.
c) Which cost driver do you think provides the more accurate measure of the cost per day for a Grand Haven resident?
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