Tacoma Hospital has three support departments and four patient services departments. The direct costs to each of the support departments are as follows:

	Direct Costs	Cost Driver
General Administration	$2,000,000	Patient Services Revenue
Facilities	$5,000,000	Space (square feet)
Financial Services	$3,000,000	Patient Services Revenue
Total	$10,000,000

The patient services revenue and space utilization (square feet) for each department are as follows:

	Patient Services Revenue	Space (square feet)
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

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. Use an allocation table similar to Exhibit 6.7 to allocate the hospitals overhead costs to the patient services departments.

EXHIBIT 6.7 Kensington Hospital: Final Allocations Patient Services Department Support Department (allocation rate) Routine Care Laboratony Radiology 277.800 x $6,000,ooo ial Services (So.05556) x $16,000,000888.960 $5,0oo,o00 ($12.64) x 199,800 2,525,472 39,600 1,336,080 6,000 = 2,466,288 2,035,000 ($0.250) 5,709,000 = 1,427,250 x 2,035,000 333.360 773.568 158,220 1,053,648 609,750 $2,928,546 2,800,0oo $5,000,000= $ 277,800 x $6,000,000= Facilities Housekeeping ($17.58) x 76,000 = Administration (0.432) x5.709,0002,466,288 Personnel 500,544 61,200 105.480 879,120 x 2,439,000 508,750 2,439,000 = 2 2 $ 8,644.050 $ 5.500,000 $14,144,050 $2,271,694 $ 3,300,0oo $5.571,694 Total indirect costs Direct costs Total costs Total indirect costs = $8,644,050+ $2,271,694 + $2.928546-$13,844290. Total costs- $14144,050+$5,571,694+$5.728,546 $25.444.290. Note: Because of rounding in the allocation process, the totals here differ slightly from the values contained in Exhibit 6.3. 5.728,546