6.5 Now assume that the hospital uses the step-down method for cost allocation,

with salary dollars as the cost driver for general administration,

housekeeping labor hours as the cost driver for facilities, and patient services

revenue as the cost driver for financial services. Assume also that the

general administration department provides fhe most services to other

support departments, followed closely by the facfities department. The

financial services department provides the least services to the other support

departments.

a. Use an allocation table to allocate the hospital's overhead costs to the

patient services departments.

b. Compare the dollar allocations with those obtained in Problem 6.4.

. Explain the differences.

c. Is the direct method or the step-down method better for cost allocation

within St. Benedict's? Explain your answer.