Final Answer:
Dr. Durango implements job order costing in her dental practice by assigning costs to each patient's treatment separately. For services like root canals with multiple visits, she tracks costs incurred for each patient's entire treatment process.
Step-by-step explanation:
Dr. Durango employs job order costing, a system where costs are assigned to each patient's specific treatment. For services like root canals that span multiple visits, she starts by assigning a unique job number to each patient. Direct costs, such as materials and labor for each visit, are tracked and associated with the corresponding job number.
Indirect costs, like overhead expenses, are allocated based on a predetermined rate or a relevant allocation basis.In the context of root canals, which often extend over several weeks or months, Dr. Durango needs to ensure that all costs are appropriately captured. For each visit, she records direct costs such as the dental materials used and the labor involved.
Indirect costs, like rent and utilities, are allocated in a way that reflects the proportion of resources consumed by each patient's treatment. This meticulous tracking is crucial to accurately determine the total cost of each root canal procedure.Challenges may arise in allocating indirect costs, as the duration and complexity of treatments may vary.
Dr. Durango must establish a fair basis for distributing overhead costs across multiple visits, ensuring that the job order costing system provides a true reflection of the resources consumed by each patient's treatment. Additionally, clear documentation of costs and meticulous record-keeping are essential to maintaining the accuracy and integrity of the job order costing system in a dental practice.