d. Which o the two drivers is B The folloring data pertain to problems 6.3 throu
ID: 2614395 • Letter: D
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d. Which o the two drivers is B The folloring data pertain to problems 6.3 through 6.6- St. Benedicr's Hospital has three support departments and four paticne departments. The direct The direct costs to cach of the support departments are as servic General Administration Facilities Financial Services $2,000,000 5,000,000 3,000,000 Selected data for the three support and four patient services departm shown below: Patient Space Services (square Housekeeping Salary Revenue feet) Labor Hours Dollars Departm Support General ent 10,000 2,000 1,500,00 5,000 3,000,000 6,500,000 Administration Facilitics Financial Services 3,000 45,000 10,000 15,000 2,000,00 Total Patient Services: Routine Care $30,000,000 400,000 150,000 $12,000,000 4,000,000 40,000 30,000 Diagnostic Services 6,000,000 60,000 15,000 6,000,000 Intensive Care 5,000,000 Other Services Total Grand Total 10,000,000 100,000 25,0007,000,000 $50,000,000 600,000220,000 $30,000,000 $50,000,000 645,000 230,000$36500,000 6.3 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 space utilization. a. What are the appropriate allocation rates? b. Use an allocation table similar to Exhibit 6.7 to allocate the hospital's overhead costs to the patient services departments.Explanation / Answer
6.3) a. The allocation rates : General Administration = $2m / $50m = $0.04 per Patient Services revenue $ Financial Services = $3m / $50m = $0.06 per Patient Services revenue $ Facilities = $5m / 0.6m sq.ft. = $8.33 per sq. ft. b. The direct allocation of hospital's overhead costs to the patient services departments: GA Facil FS Patient Services Departments Total RC IC DS OS Patient Services Rev. $30m $4m $6m $10m Space (Sq. Ft.) 0.4m 0.04m 0.06m 0.1m Overhead costs (in m): 2 5 3 Allocation of overhead: GA -2 1.2 0.16 0.24 0.4 0 Facilities -5 3.33 0.33 0.5 0.84 0 FS -3 1.8 0.24 0.36 0.6 0 Total ($m) 0 0 0 6.33 0.73 1.1 1.84
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