Mary Taylor fell and broke her clavicle while on a university-sponsored weekend rock-climbing expedition. Mary was transported to the emergency room at a local hospital where she received services from emergency room physicians, the laboratory technicians, and radiologists. When she received her bill for services, Mary was surprised by the large amount of charges. The accounts receivable clerk explained how indirect charges in the form of overhead from support departments such as accounting, food services, and education are included in the cost of delivering emergency room, laboratory, and radiology services.

Assuming the hospital uses algebraic equations to allocate service department costs, prepare a sketch to illustrate how costs would flow among the departments and to a patient. Identify reasonable cost drivers (or allocation bases) that may be used to attach emergency room, laboratory, and radiology costs to a patient. Defend your choices.