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The Facilities Department of Teton Orthopaedics & Sports Clinic had $200,000 in direct costs last year. These costs must be allocated to the clinics three
The Facilities Department of Teton Orthopaedics & Sports Clinic had $200,000 in direct costs last year. These costs must be allocated to the clinics three patient services departments using the direct allocation method. Two cost drivers are under consideration: patient services revenue and maintenance hours (which includes housekeeping and routine maintenance). Assume the following about the profit centers:
Department | Revenue | Maintenance Hours |
General Orthopaedics | $4,000,000 | 2000 |
Physical Therapy | $2,000,000 | 4000 |
Other Services | $1,000,000 | 1000 |
Total | $7,000,000 | 7000 |
Which of the two drivers is better? Why? (2 points)
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