6.3 Assume that the hospital uses the direct method for cost allocation. Furthermore, the cost driver for general administration and financial services is patient services revenue, while the cost driver for facilities is space utilization.

a. What are the appropriate allocation rates?

b. Use an allocation table similar to Exhibit 6.7 to allocate the hospitals overhead costs to the patient services department.

St. Benedict's Hospital has three support departments and four patient services departments. The direct costs to each of the support departments are General Administration $2,000,000 5.000.000 Facilities 3,000,000 Financial Services Selected data for the three support and four patient services departments are Space (Square Feet) Housekeeping Labor Hours Salary Dollars Department Patient Services Revenue Support 2,000 General 10,000 $1.500,000 Administration Facilities 20,000 5,000 3,000,000 inancial Services Total Patient Services: $30,000,000 $12,000,000 Routine Care 400.000 50,000 Intensive care 4,000,000 40,000 30,000 5,000,000 Diagnostic Services 60.000 15.000 6,000,000 6,000,000 Other Service Total Grand Total 6.3 Assume that the hospital uses the direct method for cost allocation. Furthermore, the cost driver for general administration and financial services is patient services revenue, while the cost driver for facilities is space utilization. a. What are the appropriate allocation rates? b. Use an allocation table similar to Exhibit 67 to allocate the hospital's overhead costs to the patient services departments