Assume that the hospital uses 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. (The majority of the costs of the facilities department stem from the provision of housekeeping services.)

a. What are the appropriate allocation rates?

b. Use an allocation table similar to the one used for Problem 6.3 to allocate the hospitals overhead costs to the patient services departments.

c. Compare the dollar allocations with those obtained in Problem 6.3. Explain the differences.

d. Which of the two cost driver schemes is better? Explain your answer.

The following data pertain to problems 6.3 through 6.6: St. Benedict'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 $2,000,000 Facilities 5,000,000 Financial Services 3,000,000 Selected data for the three support and four patient services departments are shown below: Salary Dollars $1,500,000 Patient Space Services (square Housekeeping Department Revenue feet) Labor Hours Support: General 10,000 2,000 Administration Facilities 20,000 5,000 Financial Services 15,000 3,000 Total 45,000 10,000 Patient Services: Routine Care $30,000,000 400,000 150,000 Intensive Care 4,000,000 40,000 30,000 Diagnostic Services 6,000,000 60,000 15,000 Other Services 10,000,000 100,000 25,000 Total $50,000,000 600,000 220,000 Grand Total $50,000,000 645,000 230,000 3,000,000 2,000,000 $6,500,000 $12,000,000 5,000,000 6,000,000 7,000,000 $30,000,000 $36,500,000