4.7 Assume that the hospital uses the direct method for cost allocation, Furthermore, salary is the cost drive for General Administration, housekeeping labor hours in the cost driver for Facilities, and patient services revenue is the cost driver for Financial Services. (The majority of the cost of the Facilities Department are devoted to housekeeping services.)

a. What are the appropriate allocation rates?

b. Allocate the hospitals overhead costs to the patient services departments.

c. Compare the dollar allocation with those obtained in the problem 4.6. Explain the differences.

d. Which of the two cost -driver schemes is better? Explain your answer.