1. Company: Upsilon Healthcare

Scenario: Overhead Allocation in Healthcare

Data:

• Total Overhead Costs: $800,000
• Cost Pools: Equipment Maintenance ($300,000), Utilities ($200,000), Administrative ($300,000)
• Allocation Bases: Machine Hours (10,000), Square Footage (8,000), Direct Labor Hours (6,000)

Requirements:

1. Allocate overhead costs to each cost pool.
2. Determine the overhead rate for each allocation base.
3. Calculate the overhead applied to a department using 2,000 machine hours, 1,500 square feet, and 1,200 direct labor hours.
4. Discuss the benefits of accurate overhead allocation in healthcare.
5. Recommend improvements to the overhead allocation process.