Problem 1:

Suppose you are working in a large HCO (real or imagined). Suppose further that your HCO has many revenue generating and support departments.

Required:

a) Choose three revenue generating and three support/non-revenue-generating departments (choose sensible departments and names that best fit those classifications).

b) Clearly choose or state the unit/metric in which the support departments are to be allocated and determine overall constraints of these metrics.

c) Logically present budgeted (real or imagined) costs before allocations and metric units of all the six departments. Note that the size of the budgeted cost before allocation and metric units must make sense and reflect the size of the respective departments.

d) Briefly describe how you will allocate costs according to Step-down Method, clearly stating the sequence of allocation

e) Present your final allocations in a tabular form and interpret your results accordingly.

Problem 2:

Mr. Khalaf was a patient at Gulf Hospital where he was admitted complaining of stomach pains. Tests revealed that Mr. Khalaf had an inflamed appendix and surgery was recommended. Once the surgery was completed, Mr. Khalaf spent one day recovering in the hospital. The surgery was routine and there were no complications; discharge was as planned.

Required:

Using four departments (of your choice) as an example,

a) Explain how the different cost apportionment methods would work

b) Explain the advantages and disadvantages of each method as they relate to the case