Question
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
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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