Marks: 20 At the beginning of the fiscal year, ABC Clinic expected to treat 10,000 patients and estimated that it would incur $1,000,000 in overhead. At fiscal year end data indicated that the clinic only saw 9,000 patients and incurred overhead of $925,000.If the clinic used a predetermined overhead rate based on number of patients, how much overhead would have been attached (allocated) to patients?
To calculate the overhead allocated to patients, we need to determine the predetermined overhead rate based on the number of patients. Then, we can multiply this rate by the actual number of patients seen at the clinic.
Step 1: Determine the predetermined overhead rate:
The predetermined overhead rate is calculated by dividing the estimated overhead by the estimated number of patients.
Predetermined overhead rate = Estimated overhead / Estimated number of patients
In this case:
Estimated overhead = $1,000,000
Estimated number of patients = 10,000
Predetermined overhead rate = $1,000,000 / 10,000 = $100 per patient
Step 2: Calculate the overhead allocated to patients:
To calculate the overhead allocated to patients, we multiply the predetermined overhead rate by the actual number of patients seen.
Overhead allocated to patients = Predetermined overhead rate x Actual number of patients seen
In this case:
Predetermined overhead rate = $100 per patient
Actual number of patients seen = 9,000
Overhead allocated to patients = $100 x 9,000 = $900,000
Therefore, the overhead allocated to patients would be $900,000.