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After reading the case study, Baker Medical Center, answer the following questions: (Remember, the task of completing the allocation study was given to you, Baker's
After reading the case study, Baker Medical Center, answer the following questions: (Remember, the task of completing the allocation study was given to you, Baker's current administrative fellow).
- How would you address each of the 4 points raised by John, which were:
- Is it fair for the Dialysis Center to suffer (in profitability) from the move even though it had nothing to do with it?
- Should the Dialysis Center be charged actual facilities costs for its new location?
- Even if the true cost concept was applied to the Dialysis Center, is the $400,000 annual allocation amount correct?
- The revenue that the Dialysis Center "receives" from patient use of the pharmacy appears to be passed on directly to the pharmacy.
- Do you support the proposed allocation scheme? If so, why? If not, how do you apply "cost-allocation" mathematically to potentially address this problem?
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