San Diego State University Operations And Supply Chain Management Assignment Help - Direct labor

Question - Dr. Alyx Hemmings is employed by Mesa Dental. Mesa Dental recently installed a computerized job-order
costing system to help monitor the cost of its services. Each patient is assigned a
job number when he or she checks in with the receptionist. The receptionist-bookkeeper notes
the time the patient enters the treatment area and when the patient leaves the area. This difference between the
entry and exit times is the number of patient hours used and the direct labor
time assigned to the dental assistant. (A dental assistant is constantly with the patient.) The
direct labor time assigned to the dentist is 50 percent of the patient hours. (The dentist typically
splits her time between two patients.)
The chartfilled out by the dental as ...Read More sistant provides additional data that is entered into the
computer. For example, the chart contains service codes that identify the nature of the treatment, such as
whether the patient received a crown, afilling, or a root canal. The chart not only
identifies the type of service but its level as well. For example, if a patient receives afilling, the
dental assistant indicates (by a service-level code) whether thefilling was one, two, three, or four
surfaces. The service and service-level codes are used to determine the rate to be charged to the
patient. The costs of providing different services and their levels also vary.
Costs assignable to a patient consist of materials, labor, and overhead. The types of materials
used"and the quantity"are identified by the assistant and entered into the computer by the
bookkeeper. Material prices are kept onfile and accessed to provide the necessary cost information. Overhead is
applied on the basis of patient hours. The rate used by Mesa Dental is $32 per
patient hour. Direct labor cost is also computed using patient hours and the wage rates of the
direct laborers. Dr. Hemmings is paid an average of $60 per hour for her services. Dental assistants are paid an
average of $20 per hour. Given the treatment time, the software program calculates and assigns the labor cost
for the dentist and her assistant; overhead cost is also assigned
using the treatment time and the overhead rate.
The overhead rate does not include a charge for any X-rays. The X-Ray Department is separate from dental
services; X-rays are billed and costed separately. The cost of an X-ray is $12
perfilm; the patient is charged $15 perfilm. If cleaning services are required, cleaning labor costs
$35 per patient hour.
Glen Johnson, a patient (Job 267), spent 30 minutes in the treatment area and had a twosurfacefilling. He
received two Novocaine shots and used three ampules of amalgam. The cost
of the shots was $14 ($7 each). The cost of the amalgam was $6 per ampule. Other direct materials used are
insignificant in amount and are included in the overhead rate. The rate charged to
the patient for a two-surfacefilling is $110. One X-ray was taken.
Required:
1. Prepare a job-order cost sheet for Glen Johnson. What is the cost for providing a twosurfacefilling? What is
the gross profit earned? Is the X-ray a direct cost of the service? Why
are the X-rays costed separately from the overhead cost assignment?
2. Suppose that the patient time and associated patient charges are given for the followingfillings:
1-Surface 2-Surface 3-Surface 4-Surface
Time 20 minutes 30 minutes 40 minutes 50 minutes
Charge $90 $110 $150 $175
Compute the cost for eachfilling and the gross profit for each type offilling. Assume that
the cost of Novocaine is $14 for allfillings. Ampules of amalgam start at two and increase
by one for each additional surface. Assume also that only one X-rayfilm is needed for all
four cases. Does the increase in billing rate appear to be fair to the patient? Is it fair to the
dental corporation? ...Read Less

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