cost pool $125,000

patient service revenue driver $0.02

house keeping druver $25

Assume that the three service departments are adult services, pediatric services, and other services. The patient services revenue and hours of housekeeping services for each department are:

Department	Revenue	Housekeeping Hours
Adult Services	$4,000,000	2,000
Pediatric Services	1,500,000	3,000
Other Services	500,000	500
Total	$6,000,000	5,500

a. What is the dollar allocation to each patient services department if patient services revenue is used as the cost driver?

b. What is the dollar allocation to each patient services department if hours of housekeeping support is used as the cost drivers?

c. What is the difference in the allocation to each department between the two drivers?

d. Which of the two drivers is better? Why?