The housekeeping services department of Ruger Clinic, a multispecialty practice, had $100,000 in direct costs in 2020.
Question:
The housekeeping services department of Ruger Clinic, a multispecialty practice, had $100,000 in direct costs in 2020.
These costs must be allocated to Ruger’s three revenue-producing patient services departments using the direct method. Two cost drivers are under consideration: patient services revenue and hours of housekeeping services used. The patient services departments generated $5 million in total revenues during 2020, and to support these clinical activities, they used 5,000 hours of housekeeping services.
a. What is the value of the cost pool?
b. What is the allocation rate if:
• patient services revenue is used as the cost driver?
• hours of housekeeping services is used as the cost driver?
Step by Step Answer:
Answering your questions about Ruger Clinics housekeeping cost allocation a Value of the Cost Pool The cost pool in this scenario is the total direct costs incurred by the housekeeping services depart...View the full answer
Gapenski's Healthcare Finance An Introduction To Accounting And Financial Management
ISBN: 9781640551862
7th Edition
Authors: Kristin L. Reiter, Paula H. Song
