Cost Allocation Exercise
Use the Direct Method Approach
Projected Revenues by patient services department						Amount
Routine care						$14,000,000
Laboratory						$5,000,000
Radiology						$3,500,000
	Total Revenues					$22,500,000
Projected Costs for all departments:
Patient Services Departments (Direct Cost)
Routine care						$3,300,000
Laboratory						$3,750,000
Radiology						$1,100,000
	Total Costs					$8,150,000
Support Services Department (Overhead Costs)
Financial Services						$1,000,000
Facilities						$2,600,000
Housekeeping						$1,200,000
Administration						$3,000,000
Personnel						$1,600,000
	Totals Costs					$9,400,000
Total Costs of both patient and support services						$17,550,000
Projected Profit						$4,950,000

Key Information
Cost Drivers				Unit Measure
Financial Services				Patient Services Revenue
Facilities				Square Footage
Housekeeping				Labor Hours
Administration				Salary Dollars
Personnel				Salary Dollars
		Patient Services		Square Ft		Housekeeping		Salary Dollars
		Revenue				Labor Hours
Routine care		$14,000,000		165,000		68,000		$4,000,000
Laboratory		$5,000,000		30,000		3,800		$750,000
Radiology		$3,500,000		65,000		7,400		$1,056,300
Total		$22,500,000		260,000		79,200		$5,806,300
COMPLETE THE TABLE (Need to calculate allocation rate)
Overhead Allocation Rates
				Cost Pool		Cost Driver		Total utilization		Allocation Rate
Financial Services				$1,000,000		Patient Services Revenue		$22,500,000
Facilities				$2,600,000		Square Footage		260,000
Housekeeping				$1,200,000		Labor Hours		79,200
Administration				$3,000,000		Salary Dollars		$5,806,300
Personnel				$1,600,000		Salary Dollars		$5,806,300

Question 18

COMPLETE TABLE (All bolded areas) 3 points

Patient Services Department

Support Department

Routine Care

Laboratory

Radiology

Financial Services

Facilities

Housekeeping

Administration

Personnel

Total Indirect Costs

Direct cost

Total cost

Total indirect cost

Total cost