Question
Use the following information to answer the questions: Memorial Hospital has three support departments and four patient services departments. The step-down method of cost allocation
Use the following information to answer the questions:
Memorial Hospital has three support departments and four patient services departments. The step-down method of cost allocation is required. | |||||||
The direct costs to each of the support departments are | |||||||
General Administration | $2,000,000 | ||||||
Facilities | $9,500,000 | ||||||
Financial Services | $2,750,000 | ||||||
Department | Patient Services Revenue | Space (Square Feet) | Housekeeping Labor Hours | Salary Dollars | |||
Support: | |||||||
General Administration | $- | 9,000 | 6,000 | $1,500,000 | |||
Facilities | $- | 15,000 | 22,500 | $4,500,000 | |||
Financial Services | $- | 8,000 | 3,500 | $1,200,000 | |||
Subtotal | $- | 32,000 | 32,000 | $7,200,000 | |||
Patient Services: | |||||||
Routine Care | $45,000,000 | 125,000 | 225,000 | $29,000,000 | |||
Intensive Care | $65,000,000 | 60,000 | 165,000 | $12,000,000 | |||
Diagnostic Services | $25,000,000 | 75,000 | 80,000 | $15,000,000 | |||
Other Services | $6,000,000 | 40,000 | 25,000 | $6,000,000 | |||
Subtotal | $141,000,000 | 300,000 | 495,000 | $62,000,000 | |||
Total | $141,000,000 | 332,000 | 527,000 | $69,200,000 |
Assume that the hospital uses salary dollars as the cost driver for general administration, housekeeping labor hours as the cost driver 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.)
What is the allocation rate for the General Administration cost pool?
What is the allocation rate for the Facilities cost pool?
What is the allocation rate for the Financial Services cost pool?
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