Wagner Hospital currently allocates all maintenance department costs based on departmental square feet. However, the manager of the pharmacy department has suggested that an ABC approach be used for the portion of the maintenance department costs that relate to repairing equipment. His contention is that the pharmacy has relatively little equipment that breaks.

However, it must subsidize many high-tech departments that require expensive equipment repairs. Using the data given below, calculate the maintenance cost assigned to the pharmacy using the existing method and using an ABC approach.

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Data Table 1 All Maintenance Costs Routine Maintenance Repairs Total Volume (sq. ft.) 100,000 800 Labor hours 10,000 4,000 14,000 Labor cost $12.00 $18.00 $13.71 hour Supplies Administration $20,000 $80,000 $100,000 $15,000 Data Table 2 Department Information All Other Pharmacy Departments Total Square feet 2,000 98,000 100,000 Volume of repairs 3 797 800 Hours of repairs 6 3,994 4,000 Supplies used for repairs $ 200 $79,800 $80,000