Week #9 problems2.docx - P 8-3 a&b The first of the...

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P 8-3 a&b: The first of the following two tables computes the allocation rates and the second table applies these rates to allocate the service dept costs Allocation rates Building services Food service Intensive care Surgery General Medicine Total Direct Allocations Building services 10,00014% 20,00029% 40,00057% 70,000100% Food service 3,0003% 4,0004% 98,00093% 105,000100% Step down -Building services first Building services 15,50018% 10,00012% 20,00023% 40,00047% 85,500100% Food service 3,0003% 4,0004% 98,00093% 105,000100% Step down-food service first Building services 10,00014% 20,00029% 40,00057% 70,000100% Food service 12,00010% 30003% 40003% 98,00084% 117,000100 % Allocated costs Building services Food service Intensive care Surgery General Medicine Total Direct Allocations Building services 14%$.84 29%$1.74 57%$3.42 $6.00 Food service1 3%$0.09 4%$0.12 93%$2.79 $3.00 $0.93 $1.86 $6.21 $9.00 Step down-Building services first Building services 18%$1.08 12%$0.72 23%$1.38 47%$2.82 $6.00 Food service 3%$0.12 4%$0.16 93%$3.79 $4.08 $0.84 $1.54 $6.61 $10.08 Step down-food service first Food service 10%$0.30 3%$0.09 3%$0.09 84%$2.25 $3.00 Building services 14%$0.88 29%$1.83 57%$3.59 $6.30 $0.97 $1.92 $6.11 $9.30 c. The step-down method with food service first allocates about $0.50 million less to General Medicine and about $0.4 million more to surgery than using Building services first. These differences are caused by
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general medicine’s almost entire consumption of meals. By starting with building services, another $1.08
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