6.8 Assume that the hospital uses salary dollars as the cost driver for general administration and employee benefits, and space utilization as the cost driver for maintenance. a. What are the appropriate allocation rates?

b. Use an allocation table to allocate the hospitals overhead costs to the patient services departments.

St. Luke's Hospital has three support departments and four patient services departments. The direct costs to each of the support departments are as follows: General Administration $4,000,000 Maintenance 5,000,000 Employee Benefits 4,000,000 Selected data for the three support and four patient services departments are shown below: Patient Services Revenue Space (square feet) Number of Full-Time Equivalent Employees Salary Dollars 8,000 15 $ 2,500,000 75 10,000 7,000 25,000 50 3,500,000 3,000,000 $ 9,000,000 140 Department Support: General Administration Maintenance Employee Benefits Total Patient Services: Routine Care Intensive Care Obstetrics Services Other Services Total Grand Total 700 200 $40,000,000 500,000 7,000,000 45,000 4,000,000 35,000 12,000,000 200,000 $63,000,000 780,000 $63,000,000 805,000 150 400 $18,000,000 6,000,000 4,000,000 8,000,000 $36,000,000 $45,000,000 1,450 1,590 St. Luke's Hospital has three support departments and four patient services departments. The direct costs to each of the support departments are as follows: General Administration $4,000,000 Maintenance 5,000,000 Employee Benefits 4,000,000 Selected data for the three support and four patient services departments are shown below: Patient Services Revenue Space (square feet) Number of Full-Time Equivalent Employees Salary Dollars 8,000 15 $ 2,500,000 75 10,000 7,000 25,000 50 3,500,000 3,000,000 $ 9,000,000 140 Department Support: General Administration Maintenance Employee Benefits Total Patient Services: Routine Care Intensive Care Obstetrics Services Other Services Total Grand Total 700 200 $40,000,000 500,000 7,000,000 45,000 4,000,000 35,000 12,000,000 200,000 $63,000,000 780,000 $63,000,000 805,000 150 400 $18,000,000 6,000,000 4,000,000 8,000,000 $36,000,000 $45,000,000 1,450 1,590