The housekeeping Services Department of ABC Hospital had $250,000 in direct cost
ID: 2704265 • Letter: T
Question
The housekeeping Services Department of ABC Hospital had $250,000 in direct costs during 2006. These costs must be allocated to ABC's three revenue-producing patient services dpartments using the direct method. Two cost drivers are under consideration: patient services revenue and hours of housekeeping services utilized. The patient services departments generated $8 million in total revenues during 2006, and to support these clinical activities, used 7,000 hours of housekeeping services.
If one of the patient services department had $3,000,000 in revenue and used 2,000 housekeeping hours, its dollar allocation if revenue is used as the cost driver would be __________ and if housekeeping hours is used as the cost driver would be ______?
A.) $96,000, $71, 420
B.) $3 million, $2000
C.) $600,000, 100
D.) none of the above
Explanation / Answer
If its dollar allocation if revenue is used as the cost driver
Cost would be = 3,000,000/8000000* 250,000 =$93750
if housekeeping hours is used as the cost driver
Cost would be = 2000/7000*250,000 =$71428.57
D.) none of the above
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