6.1. The housekeeping services department of Ruger Clinic, a multispecial- ty practice in Toledo, Ohio, had $100,000 in direct costs during 2011. These costs must be allocated to Rugers three revenue-producing pa- tient services departments using the direct method. Two cost drivers are under consideration: patient services revenue and hours of house- keeping services used. The patient services departments generated $5 million in total revenues during 2011, 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? 6.2 Refer to Problem 6.1. Assume that the three patient services departments are adult services, pediatric services, and other services. The patient services revenue and hours of housekeeping services for each department are :

Housekeeping direct costs				$150,000
Department		Revenue		Housekeeping Hours
Adult Services		$4,500,000		2,000
Pediatric Services		2,500,000		3,500
Other Services		500,000		500
Total		7,500,000		6,000

a. What is the dollar allocation to each patient services department if patient services revenue is used as the cost driver?

b. What is the dollar allocation to each patient services department if hours of housekeeping support are used as the cost driver?

c. What is the difference in the allocation to each department be- tween the two drivers? d. Which of the two drivers is better? Why? Please explain the answers