Chapter 6: Cost Allocation 215 Department Revenue Housekeeping flours Adult Services $3,000,000 1,500 Pediatric Services 1,500,000 3,000 • Other Services 500, XXXXXXXXXXTotal 55,000,000 5,000 a. What...

Tiie following data pertain to problems 6.3 through 6.6:
St. Benedict's Hospital has three support departments and four patient services departments. The
direct costs to each of the support departments are
General Administration $2,000,000
Facilities 5,000,000
Financial Services 3,000,000
Selected data for the three support and four patient services departments are
Patient Space
Services (Square Housekeeping Salary
Department Revenue Feet) Labor Hours Dollars
Support:
General 10,000 2,000 51,500,000
Administration
Facilities 20,000 5,000 3,000,000
Financial Services 15,000 3,000 2,000,000
Total 45,000 10,000 $6,500,000
Patient Services:
Routine Care $30,000,000 400,000 150,000 S12,000,000
Intensive Care 4,000,000 40,000 30,000 5,000,000
■
1
Diagnostic Services 6,000,000 60,000 15,000 6,000,000
Other Services 10,000,000 100,000 25,000 7,000,000
Total $50,000,000 600,000 220,000 S3 0,000,000
Grand Total $50,000,000 645,000 230,000 $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 is
patient services revenue, while the cost driver for facilities is space utilization.
a. What are the appropriate allocation rates?
Patient Services

Routine
Care
Intensive
Care
Diagnostic
Services
Other
Services
Allocation rates for General Administration and Financial Services
Revenue 30,000,000 4,000,000 6,000,000 10,000,000
Percentage 60.00% 8.00% 12.00% 20.00%
Allocation rates for Facilities
Space Square 400,000 40,000 60,000 100,000
Percentage 66.67% 6.67% 10.00% 16.67%

b. Use an allocation table similar to Exhibit 6.7 to allocate the hospital's overhead
costs to the patient services departments.

COST ALLOCATION
Routine
Care
Intensive
Care
Diagnostic
Services
Other
Services
General
Administration
Facilities
Financial
Services
Total
Salary 12,000,000 5,000,000 6,000,000 7,000,000 1,500,000 3,000,000 2,000,000 36,500,000
Direct Cost

2000000 5000000 3000000 10,000,000
Sub Total 12,000,000 5,000,000...