Week 9 Problems .docx - P 8-3 Rose Hospital a Allocate the...

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P 8-3: Rose Hospital a. Allocate the two service department costs to the three patient care units using the direct method of allocating service department costs. b. Same as part (a) except use the step-down allocation method with Building Services as the first service department allocated. Answer for a & b 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
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c. Write a short, nontechnical memo to management explaining why the sum of the two service
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