Ch.6 in-class exercise

Ch.6 in-class exercise - the departments are shown in Table...

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Chapter 6 Cost Allocation In-class Examples Mercy Hospital has two support departments and two patient service departments. Direct costs for each of the Departments are shown in Table 1 below. Table 1. Direct Costs Department Type Direct Costs Facilities Services Support $8,600,000 General Administration Support 5,250,000 Routine Care Patient Services 8,300,000 Critical Care Patient Services 3,300,000 Mercy has determined that the cost driver for facilities services is square feet, and the cost driver for general administration is total revenue. Cost driver volumes for each of
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Unformatted text preview: the departments are shown in Table 2 below. Table 2. Cost Driver Volumes Department Square Feet Revenue Facilities Services 100,000 $0 General Administration 75,000 Routine Care 261,000 22,000,000 Critical Care 39,600 5,000,000 Exercises: 1. Allocate the support department costs to the patient service departments using the direct method of cost allocation. 2. Allocate the support department costs to the patient service departments using the step-down method of allocation. Assume that Facilities Services costs are allocated first....
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