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I am having difficulties with the following two part chapter review problem: Use the following data to answer the question 6.3 (a&b):

I am having difficulties with the following two part chapter review problem:


Use the following data to answer the question 6.3 (a&b):


St. Benedict's Hospital has three support departments and four patient services departments.  The direct cost to each of the support departments is as follows:

General Administration $2,000,000

Facilities $5,000,000

Financial Services $3,000,000


Selected data for the three support and four patient service departments are shown below:


Department         Patient Services Revenue       Square feet    Housekeeping Labor Hours   Salary dollars

Support:

General Admin       10,000          2,000   $1,5000,000

Facilities                                               20,000 5,000     3,000,000

Financial Services 15,000 3,000                2,000,000

Total              45,000 10,000     6,500,000

Patient Services:

Routine Care $30,000,000 400,000 150,000 $12,000,000

Intensive Care                  4,000,000                 40,000   30,000               5,000,000

Diagnostic Services             6,000,000 60,000   15,000                6,000,000

Other Services   10,000,000 100,000     25,000     7,000,000

Total $50,000,000 600,000 220,000     $30,000,000

GRAND TOTAL $50,000,000 645,000 230,000 $36,500,000


6.3 Assume that the hospital uses the direct method for cost allocation. Furthermore, the cost driver for general administration and financial services and patient services revenue, while the cost driver for facilities is space utilization.


a.) What are the appropriate allocation rates?


  b.)  Use the table below to allocate the hospitals overhead costs to the patient services departments. Fill in the chart below:


Support Department Allocation Rate Routine Care     Intensive Care    Diagnostic Services Total

General Admin _____________ ___________     _____________   __________________ _________

Facilities _____________ ___________     _____________   __________________ _________

Financial Services _____________ ___________      ____________   __________________ _________

Total Indirect Costs _____________ ___________      ____________   __________________ __________

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