Costing System Case Study: Westmount Retirement Residence

Case Instructions

Introduction

 
Your case assignment is a valuable learning tool. It allows you to integrate a number of intermediate management accounting topics along with knowledge you have gained from your business studies as it applies to a specific business scenario. The case in this assignment is intended to be used in the costing section of an intermediate managerial accounting course. The situation at Westmount Retirement Residence depicts the complexities that exist when attempting to determine a comprehensive costing system. The effect of the costing system on end-consumer pricing is also a key point of the case. 

Begin your case analysis after you have completed Module 6 and Assignment 3. It is due after your final module and should be submitted for marking before you write your final exam. 

Case Instructions 

The administrator of the Westmount Retirement Residence is concerned about the current cost accounting system. The administrator is not clear on how much each service offered was truly costing, and therefore charged each resident the same price per month regardless of his/her individual needs. In the past, the majority of patients demanded similar services, and therefore this pricing and costing system was appropriate. However, with demographic changes to the population, some residents required intense medical care, while others were healthy and fit and required less care. A new pricing model has to be developed that reflects both the size of suite inhabited and the level of medical care and service required by each individual patient. 

• How to Analyze a Case

• Westmount Retirement Residence Case

As you prepare your case assignment, there are a number of questions you should consider. These include:

1. What business is Westmount in? What do they do that differentiates them from their local competition?

2. What is the challenge facing Roswell?

3. How is the current costing system designed? How is it used for pricing? 

As you prepare your case assignment, there are a number of questions you should consider. These include:

1. What business is Westmount in? What do they do that differentiates them from their local competition?

2. What is the challenge facing Roswell?

3. How is the current costing system designed? How is it used for pricing?

4. What are the strengths and weaknesses of the current model?

5. What is the reason for their low profitability in the prior year?

You will need to design a new costing model for Westmount. Reflect on what Roswell has been using to date and how you would potentially change the cost driver for your new system based on the changing levels of needs for Westmount's residents. 

Include a recommendation of the price that Westmount should charge under your new model. Under the analysis of alternatives section, you will need to design a single new costing model that considers the cost per resident under your alternatives. This should include a step-down costing analysis that includes assignment of direct and indirect costs. You will need to determine the best way to allocate indirect costs from service departments. 

Include supporting tables as necessary to explain your alternatives and final recommendation. Your recommendation should include recommendations on pricing that relate to your analysis. 

The presentation of your case assignment should follow the steps presented in the How to Analyze a Case PowerPoint presentation you were asked to review. The questions above will assist you in your analysis of the case. 

Assignment Format When completing your assignment, make sure you: 

1. Identify the problems and issues.

2. Generate alternatives.

3. Analyze and evaluate the alternatives.