The outpatient center generates a much larger revenue

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Unformatted text preview: able and mutually beneficial cost structure before proceeding with the expansion. The original allocation process primarily focuses on square footage and disregards profitability or revenue generation for the unexpanded facility. The outpatient center generates a much larger revenue stream. Both facilities are charged $15 per square foot even though the outpatient center holds 80% of the facilities square footage. The post- expansion initial allocation of costs provides an expansion of the outpatient center by 20,000 square feet, while the new dialysis centers size remains constant at 20,000 square feet. The initial allocation for the new dialysis facility also increases square footage cost by 5% while the outpatient facility expands with no increase in cost. It is unfair for the dialysis center to...
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This document was uploaded on 02/24/2014 for the course HCM 4550 at University of Minnesota Duluth.

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