In the past, the medical center has aggregated all facilities costs, and then allocated the total amount on the basis of square footage. The proposed allocation for the Dialysis Center, on the other hand, requires it to bear the true facilities costs of its new space. What are the advantages and disadvantages of the new methodology? Do you support the new allocation scheme?
If the new allocation method for facilities costs is implemented, what should be the facilities allocation to the Dialysis Center in 20 years, when the loan, and hence total cost of the move, has been paid off and there are no longer any actual facilities costs?
Do you think the new Dialysis Center will be able to attract more patients? What impact would additional volume have on the facilities allocation decision?
Although not shown on Table 1, the Center uses (sells) $800,000 of drugs annually in its dialysis treatments, which cost the hospital (pharmacy) $400,000. The $400,000 profit on these drugs accrues to the pharmacy, which records $800,000 of revenues and $400,000 of costs on its P&L statement. Does this seem fair? If not, what could be done to remedy the situation?
When all issues related to the decision are considered, what is your recommendation regarding the handling of the pharmacy revenues and the final allocation amounts?
Already registered? Login
Not Account? Sign up
Enter your email address to reset your password
Back to Login? Click here