in to problems 0.3 throna departments and four he support departments The pillowing dan permain to problem Benedict's Hospital has three support de arunents. The direct costs to each of the su General Administration Facilities Financial Services Selected data for the three support and four pati shown below: $2,000.00 5.000.000 3.000.00 What are b. Use an alle to allocate the departments Compare the 6.3. Explain d. Which of the answer 6.5 (Hint: The step this problem, Now assume the four patient services de ices de Housekeepin fect) Labor Hours cost allocation administration facilities, and services. Assun provides them closely by the provides the 2,000 515 Patient Space Services (square Department Revenue Support: General 10,000 Administration Facilities 20,000 Financial Services 15,000 Total 45,000 Patient Services: Routine Care $30,000,000 400,000 Intensive Care 4,000,000 40,000 Diagnostic Services 6,000,000 60,000 Other Services 10,000,000 100,000 Total $50,000,000 600,000 Grand Total $50,000,000 645,000 5,000 3,000 10,000 565 $12.00 5,000 150,000 30,000 15,000 25,000 220,000 230,000 2. Use an allo the patient b. Compared 6.4. Explai c. Is the direc allocation 6.6 Return to the drivers as spel and facilities financial servi and $1,000,0 activities. 7.000 $300 536 2. Devise and that the fi functions. 0.3 Assume that the hospital uses the direct method for cost alloc Furthermore, the cost driver for general administration and services is patient services revenue, while the cost driver space utilization a. What are the appropriate allocation rates! b. Use an allocation table similar to Exhibit 6.7 to hospital's overhead costs to the patient services ac le cost driver for faili b. Is there a completin c. What are cost pool hibit 6.7 to allocate the services departments 6.4 Assume that the he Leeume that the hospital uses salary dollars as the cost driver peral administration, housekeeping labor hours as the cost ier 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 hospital's overhead costs to the patient services on 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. A-Describe the primary attributes of a good cost driver. B-In Problems 6.3 and 6.4 (St. Benedict's Hospital), the Financial Services Department was a single cost pool and the cost driver selected to allocate Financial Services Department cost was patient service revenue. B1 - Is Patient Service Revenue a good or bad cost driver for Financial Services Department costs? Please explain why? C-Assume that you are not limited to the cost pools or drivers provided for St. Benedict's Hospital in Problems 6.3 and 6.4. What are your recommendation of how best to allocate the $2,000,000 of Financial Services Department costs to the patient service departments? C1-What, if anything would you do to the Financial Service Department cost pool? C2-What cost driver(s), including cost driver(s) not listed in St. Benedict's, would you recommend to use to allocate Financial Services Department costs? Please explain why you have made your recommendation regarding the cost driver(s) D-What is the primary differences between the Direct Method of allocating overhead (Problem 6.3 and 6.4) and the Step-Down Method? D1 - Explain the primary difference. D2-Which method, Direct or Step-Down, is used most often by hospitals and why
