Assume that salary dollars are the cost driver for General Administration, housekeeping labor hours are the cost driver for Facilities, and patient services revenue are the cost driver for Financial Services.

But the hospital wants to use the step-down method for cost allocation. Solve:

Initial Allocation of General Administration

Allocation Rate = ? per dollar of salary

Allocation to Facilities = ?

Allocation to Financial Services = ?

Subsequent Allocation of Facilities

Allocation Rate = ? per housekeeping hour

Allocation to Financial Services = ?

Subsequent Allocation of Financial Services

Allocation Rate = ? per dollar of patient services revenue

Final Allocation Table

		Patient Services Department
	Routine	Intensive	Diagnostic Services	Other Services	Total
General Administration	?	?	?	?	?
Facilities	?	?	?	?	?
Financial Services	?	?	?	?	?

Here is information about the hopsital:

Support Department	Direct Cost
General Administration	$ 2,000,000
Facilities	$ 5,000,000
Financial Services	$ 3,000,000

	Patient Service Revenue ($)	Space (sq-ft)	Housekeeping Labor Hours	Salary Dollars ($)
Support: (Cost Centers)
General Administration		10,000	2,000	1,500,000
Facilities		20,000	5,000	3,000,000
Financial		15,000	3,000	2,000,000
Total		45,000	10,000	6,500,000
Patient Services: (Revenue Centers)
Routine	30,000,000	400,000	150,000	12,000,000
Intensive	4,000,000	40,000	30,000	5,000,000
Diagnostic Services	6,000,000	60,000	15,000	6,000,000
Other Services	10,000,000	100,000	25,000	7,000,000
Total	50,000,000	600,000	220,000	30,000,000
Grand Total	50,000,000	645,000	230,000	36,500,000