16 Healthcare Finance Furthermore, the cost driver for general administration and financial services is patient services revenue, while the cost driver for facilities is space utilization. 6.3) Assume that the hospital uses the direct method for cost allocation a. What are the appropriate allocation rates? b. Use an alkocation table similar to Exhibit 6.7 to allocate the hospital's overhead costs to the patient services departments. Assume that the hospital uses salary dollars as the cost driver for general dministration, housekceping labor hours as the cost driver for facilities and patient services revenue as the cost driver for financial services. (The majority of the costs of the facilities department stem from the provision of housekeeping services.) a. What are the appropriate allocation rates? 6 for Problem 6.3 to a cate the hospital's overhcad costs to the patient services departments c Compare the dollar allocations with those obtained in Problem 6.3 Explain the differences. d. Which of the two cost driver schemes is better? Explain your answer 6.5 Now assume that the hospital uses the step down method for cot location, with salary dollars as the cost driver for general administration housckeeping labor hours as the cost driver for facilities, and patient vices revenue as the cost driver for financial services. Assume also thar the general administration department provides the most services to ol support departments, followed closely by the facilities departmen financial services department provides the least services to the o Th cnts. a. Use an allocation table to allocate the hospital's overhead co patient services departments. b. Compare the dollar allocations with thosc olt Explain the differences 16 Healthcare Finance Furthermore, the cost driver for general administration and financial services is patient services revenue, while the cost driver for facilities is space utilization. 6.3) Assume that the hospital uses the direct method for cost allocation a. What are the appropriate allocation rates? b. Use an alkocation table similar to Exhibit 6.7 to allocate the hospital's overhead costs to the patient services departments. Assume that the hospital uses salary dollars as the cost driver for general dministration, housekceping labor hours as the cost driver for facilities and patient services revenue as the cost driver for financial services. (The majority of the costs of the facilities department stem from the provision of housekeeping services.) a. What are the appropriate allocation rates? 6 for Problem 6.3 to a cate the hospital's overhcad costs to the patient services departments c Compare the dollar allocations with those obtained in Problem 6.3 Explain the differences. d. Which of the two cost driver schemes is better? Explain your answer 6.5 Now assume that the hospital uses the step down method for cot location, with salary dollars as the cost driver for general administration housckeeping labor hours as the cost driver for facilities, and patient vices revenue as the cost driver for financial services. Assume also thar the general administration department provides the most services to ol support departments, followed closely by the facilities departmen financial services department provides the least services to the o Th cnts. a. Use an allocation table to allocate the hospital's overhead co patient services departments. b. Compare the dollar allocations with thosc olt Explain the differences