Grand Haven is a senior living community that offers a full range of services including independent living, assisted living, and skilled nursing care. The assisted living division provides residential space, meals, and medical services (MS) to its residents. The current costing system adds the cost of all 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, Grand Haven's accountant recommended that an ABC system be designed to calculate more accurately the cost of MS provided to residents. She decided that residents should be classigied into four categories (A, B, C, D) based on the level of services received, with Group A representing the lowest level of service 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 accountant has gathered the following data for the most recent annual period:
Resident Classification --- Annual Resident Days --- 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
Totals 21,900 ------ 32,500 ---- 216,000
Other data:
Total cost of medical services for the period ----- $2,500,000
Total cost of meals and residential space ------ $1,642,500
Required (round answers to the nearest dollar)
a. Determine the ABC cost of a resident day for each category of residents using assistane hours as the cost driver.
b. Determine the ABC cost of a resident day for each category of residents using assitance contacts as the cost driver.
c. Which cost driver do you think provides the most accurate measure of the cost per day for a Grand Haven resident?