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I am having difficulties with the following two part chapter review problem: Use the following data to answer the question 6.3 (aamp;b):
I am having difficulties with the following two part chapter review problem:
Use the following data to answer the question 6.3 (a&b):
St. Benedict's Hospital has three support departments and four patient services departments. The direct cost to each of the support departments is as follows:
General Administration$2,000,000
Facilities$5,000,000
Financial Services$3,000,000
Selected data for the three support and four patient service departments are shown below:
Department Patient Services Revenue Square feet Housekeeping Labor Hours Salary dollars
Support:
General Admin 10,000 2,000 $1,5000,000
Facilities 20,0005,000 3,000,000
Financial Services15,0003,000 2,000,000
Total 45,00010,000 6,500,000
Patient Services:
Routine Care$30,000,000400,000150,000$12,000,000
Intensive Care 4,000,000 40,000 30,000 5,000,000
Diagnostic Services 6,000,00060,000 15,000 6,000,000
Other Services 10,000,000100,000 25,000 7,000,000
Total$50,000,000600,000220,000 $30,000,000
GRAND TOTAL$50,000,000645,000230,000$36,500,000
6.3 Assume that the hospital uses the direct method for cost allocation. Furthermore, the cost driver for general administration and financial services and patient services revenue, while the cost driver for facilities is space utilization.
a.) What are the appropriate allocation rates?
b.) Use the table below to allocate the hospitals overhead costs to the patient services departments. Fill in the chart below:
Support DepartmentAllocation RateRoutine Care Intensive Care Diagnostic ServicesTotal
General Admin________________________ _____________ ___________________________
Facilities________________________ _____________ ___________________________
Financial Services________________________ ____________ ___________________________
Total Indirect Costs________________________ ____________ ____________________________
