Please provide equations for all.
EXHIBIT 7.1 Revenues Eagan Family Practice: Adult Medicine $12,000,000 Departmental Revenue Obstetrics 6,000,000 and Cost Projections Pediatrics 2,000,000 Total revenues $20,000,000 Direct Costs Patient Services Adult Medicine $ 6,000,000 Obstetrics 3,600,000 Pediatrics 1,200,000 Subtotal $ 10,800,000 Support Administration $ 1,000,000 Facilities 4,400,000 Finance 1,800,000 Subtotal $ 7,200,000 Total expenses $18,000,000 Pretax profit $ 2,000,000Case 7: Eagan Family Practice 51 EXHIBIT 7.2 Percentage of Services Provided by Eagan Family Practice: Services Provided to Administration Facilities Finance Allocation Percentages Administration 5% 5% Facilities 10% Finance 10 10 Adult Medicine 35 55 50 Obstetrics 20 10 25 Pediatrics 25 20 15 Total 100% 100% 100% Percentage to support departments 20% 15% 10% Percentage to patient service departments 80% 859% 90% Notes: 1. The allocation percentages are based on a two-year analysis of the actual services provided by the support departments to other departments. 2. To use the percentages to perform an allocation, they may have to be adjusted to ensure that the entire amount of the cost pool is allocated. To illustrate, in the direct method, all of Administration's costs ($500,000) have to be allocated directly in a single allocation to the three patient service departments. If the raw percentages were used, only 35% + 20% + 25% = 80% of the cost pool would be allocated, so the allocation percentages have to be adjusted so that 80 percent represents the entire allocation (100 percent). Thus, instead of a 35 percent allocation to Adult Medicine, its adjusted allocation is 35%/80% = 43.75%. In a similar manner, the adjusted allocation to Obstetrics is 20%/80% = 25%, while the adjusted allocation to Pediatrics is 25%/80% = 31.25%. When done correctly, the adjusted percentages must sum to 100%: 43.75% + 25% + 31.25% = 100%.Assume that Ashley plans to allocate support department costs to the patient services departments using the direct method. Using the information provided in Exhibit 7.2, what percentage of the costs of the Finance department would be allocated to the Adult Medicine department using the direct method? Assume that Ashley plans to allocate support department costs to the patient services departments using the direct method. Using the information provided in Exhibits 7.1 and 7.2, what is the dollar amount of Finance cost that would be allocated to the Adult Medicine department using the direct method?Assume that Ashley plans to allocate support department costs to the patient services departments using the direct method. Using the information provided in Exhibits 7.1 and 7.2, what is the dollar amount of Finance cost that would be allocated to the Facilities department using the direct method? d) Assume that Ashley plans to allocate support department costs to the patient services departments using the direct method. What is the total indirect cost allocation (from all three support departments combined) to the Adult Medicine department under this method
