Cost Allocation Exercise

Use the Direct Method Approach

Projected Revenues by patient services department Amount

Routine care $$36,000,000$

Laboratory $$19,000,000$

Radiology $$17,000,000$

Total Revenues $$72,000,000$

Projected Costs for all departments:

Patient Services Departments $($Direct Cost$)$

Routine care $$19,000,000$

Laboratory $$10,000,000$

Radiology $$11,000,000$

Total Costs $$40,000,000$

Support Services Department $($Overhead Costs$)$

Financial Services $$5,000,000$

Facilities $$7,200,000$

Housekeeping $$3,500,000$

Administration $$5,000,000$

Human Resources $$3,200,000$

Totals Costs $$23,900,000$

Total Costs of both patient and support services $$63,900,000$

Projected Profit $$8,100,000$

Cost Allocation Exercise

Use the Direct Method Approach

Projected Revenues by patient services department Amount

Routine care $$36,000,000$

Laboratory $$19,000,000$

Radiology $$17,000,000$

Total Revenues $$72,000,000$

Projected Costs for all departments:

Patient Services Departments $($Direct Cost$)$

Routine care $$19,000,000$

Laboratory $$10,000,000$

Radiology $$11,000,000$

Total Costs $$40,000,000$

Support Services Department $($Overhead Costs$)$

Financial Services $$5,000,000$

Facilities $$7,200,000$

Housekeeping $$3,500,000$

Administration $$5,000,000$

Human Resources $$3,200,000$

Totals Costs $$23,900,000$

Total Costs of both patient and support services $$63,900,000$

Projected Profit $$8,100,000$

Question $18$

COMPLETE TABLE $($All highlighted areas and questions should be filled in using formulas and pertinent data from prior worksheets$---$Direct $1$ and Direct Cost Drivers$)3$ points

Patient Services Department

Support Department Routine Care Laboratory Radiology Totals Allocated

Financial Services

Facilities

Housekeeping

Administration

Human Resources

Total Indirect Costs

Direct cost

Total cost

What is the resulting profitability of each Department and the organization as a whole??

Hint $....$Use Revenues by Department from Direct $1$ Worksheet tab and Total Departmental Costs from above to derive profit by Department. Verify overall profit mathche that shown at bottom of Direct $1$ worksheet tab