Given: The Hospital has three support departments and four patient services departments. The direct costs to each of the support departments are as follows: Support Depts: General admin Facilities Financial Services $ Amount of Costs: 2,500,000 $ 5,500,000 $ 3,000,000 The hospital also shows the following data which managers will use to assess costs. Departments: General Admin Facilities Financial Services TOTAL: Patient Services Revenue Space (Square ft) Housekeeping Labor Hours Salary (dollars) No. of Patients Registered 12,000 2,800 $ 1,800,000 22,000 6,000 $ 3,400,000 14,000 2,200 $ 2,200,000 48,000 11,000 $ 7,400,000 Patient Services: Medical $ 40,000,000 500,000 200,000 $ 16,000,000 16,000 Emergency Room $ 14,000,000 22,000 40,000 $ 8,000,000 7,000 Radiology $ 8,000,000 40,000 20,000 $ 3,000,000 10,000 Operating Room $ 18,000,000 150,000 50,000 $ 10,000,000 3,600 TOTAL: $ 80,000,000 712,000 310,000 $ 37,000,000 36,600 GRAND TOTAL: $ 80,000,000 760,000 321,000 $ 44,400,000 36,600 31 Part A. Determine the allocation of the Support Departments based on the following cost drivers: 32 33 The hospital uses the direct method for cost allocation. And, the cost drivers are as follows: Departments: Cost Drivers: 34 35 General Admin 36 Facilities 37 Financial Services 38 Salary Dollars Housekeeping Labor Hours Patient Services Revenue 39 1) Determine the allocation rates for each of the three support departments: Departments: 40 41 42 General Admin 43 Facilities 44 Financial Services 45 46 Allocation Rate: 6.76% 17.742 3.75% 47 2) Allocate the hospital's overhead costs (support departments) to each of the 48 Patient Services Departments based on the allocation rates in Part A-1. - H 49 50 51 Medical Emergency Room Radiology Operating Room TOTAL 52 Departments: 53 General Admin 1,081,081.08 54 Facilities 3,548,387.097 55 Financial Services 1,500,000.00 540,540.541 709,677.419 354,838.710 525,000.000 300,000 202,702.703 675,675.676 2,500,000 887,096.774 5,500,000 56 Total OH costs: 6,129,468.178 1,775,217.960 857,541.412 675,000 2,237,772.45 3,000,000 11,000,000 57 58 A B C D E F 60 Part B. Determine the allocation of the Support Departments based on the following cost drivers: 61 62 Departments Cost Drivers 63 General Admin No. of patients registered 64 Facilities 65 Financial Services Square Feet of Space Patient Services Revenue 66 68 69 671) Determine the allocation rates for each of the three departments: Departments Allocation Rate: 70 General Admin $ 68.31 71 Facilities 7.725 72 Financial Services 3.75% 73 74 75 2) Allocate the hospitals's overhead costs (support departments) to each of the Patient 76 Services departments based on the allocation rates in Part B-1. G H 77 78 Departments Medical Emergency Room 79 General Admin 1,092,896.175 478,142.077 80 Facilities 3,862,359.551 169,943.8202 Radiology 683,060.109 308,988.764 Operating Room 245,901.639 1,158,707.865 TOTAL 2,500,000 5,500,000 81 Financial Services 1,500,000.00 525,000.000 300,000 675,000 3,000,000 82 Total OH costs: 6,455,255.725 1,173,085.897 1,292,048.87 2,079,609.505 11,000,000 83 84 85 Part C: 86 Prepare an Assessment of your results based on the above allocation of costs of the three 87 Support Departments to each of the four Patient Service Departments. (Does there seem to be 88 a variation between the results using the various cost drivers and does the allocation of costs 89 appear to be more reasonabile using one cost driver over another. What would be your choices 90 of cost drivers? Could you consider any others that would present a better causal relationship 91 between the cost driver (allocation base) and the three corresponding Support Departments?) 92