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Department Direct Costs Space (Square Feet) Housekeeping Labor Hours Salary Dollars Support: General Admin $4,000,000 8,000 3,000 $2,000,000 Facilities 6,000,000 25,000 6,000 4,000,000 Financial Services

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Department

Direct Costs

Space (Square Feet)

Housekeeping Labor Hours

Salary Dollars

Support:

General Admin

$4,000,000

8,000

3,000

$2,000,000

Facilities

6,000,000

25,000

6,000

4,000,000

Financial Services

3,000,000

10,000

4,000

2,500,000

Total

$13,000,000

43,000

13,000

$8,500,000

Patient Services:

Patient Services Revenue

Routine Care

$40,000,000

400,000

150,000

$12,000,000

Intensive Care

5,000,000

40,000

30,000

5,000,000

Diagnostic Services

8,000,000

60,000

15,000

6,000,000

Other Services

12,000,000

100,000

25,000

7,000,000

Total

$65,000,000

600,000

220,000

$30,000,000

Grand Total

$65,000,000

643,000

233,000

$38,500,000

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 hospitals overhead costs to the patient services departments.

6.4 Assume that the hospital uses salary dollars as the cost driver for general administration, housekeeping labor hours as the cost driver for facilities, and patient services revenue as the cost driver for financial services. (The majority of the costs of the facilities department stem from the provision of housekeeping services.) a. What are the appropriate allocation rates? b. Use an allocation table similar to the one used for Problem 6.3 to allocate the hospitals overhead costs to the patient services departments. c. Compare the dollar allocations with those obtained in Problem 6.3. Explain the differences. d. Which of the two cost driver schemes is better? Explain your answer

please dont post the answer as a picture so i can add and change the calculations if necessarily

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