can you help? The question is 6.3 a) and b).
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 S50,000,000 645,000 230,000 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 6.3 Assume that the hospital uses the direct method for cost allocation. Furthermore, the cost driver for general administration and financial services is patient services revenue, while the cost driver for facilities is space utilization a. What are the appropriate allocation rates? b. Use an allocation table similar to Exhibit 6.7 to allocate the hospital's overhead costs to the patient services departments. 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 6.3 Assume that the hospital uses the direct method for cost allocation. Furthermore, the cost driver for general administration and financial services is patient services revenue, while the cost driver for facilities is space utilization a. What are the appropriate allocation rates! b. Use an allocation table similar to Exhibit 6.7 to allocate the hospital's overhead costs to the patient services departments EXHIBIT 6.7 Kensington Hospital: Final Allocations Healthcare Finance Patient Services Department Support Department (allocation rate) Routine Care $ B88.960 x $16,000,000 X 199.800 Laboratory * $5,000,000 $ 277,800 X 39.600 500,544 X 6,000 - 105,480 2.525.472 x 76,000 1.336,080 For permission, please contact Copyright Clearance Center at www.copyright.com Copying and distribution of the POF is prohibited without written permission Financial Services (50.05556) Facilities ($12.64) Housekeeping ($17.58) Administration (50.432) Personnel (50.250) Total indirect costs Radiology X $6,000,000 $ 333.360 X 61,200 - 773.568 X 9.000 158,220 X 2,439,000 1,053,648 X 2.439,000 609.750 $ 2,928,546 $ 2,800,000 x 5.709,000 2,466,288 X 2,035.000 879.120 X 5.709,000 1,427,250 X 2,035.000 $ 8,644.050 $ 5.500,000 508.750 $ 2,271,694 $ 3.300,000 Direct costs Total costs $ 14,144.050 $ 5.571,694 $ 5.728.546 Total indirect costs - $8,644.050 + $2,275,694 +$2,928,546 - $13,844.290, Total costs $14.144.050 + $5.571,694 + $5.728,546 $25.444.290. Note: Because of rounding in the allocation process, the totals here differ slightly from the values contained in a bit 6.3
