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Exhibit 4 County Hospital Cost Allocation Data Support Departments Housekeeping Direct Cost Space (Sq. Ft) Housekeeping...

Exhibit 4
County Hospital Cost Allocation Data

Support Departments Housekeeping Direct Cost Space (Sq. Ft)

Housekeeping $500,000 8,000

General Administration $750,000 12,000

Maintenance $600,000 15,500

TOTAL SUPPORT DEPTS. $1,850,000 35,000

Patient Service Departments Direct Cost Space (sq. ft) revenues

Medicine $800,000 10,000 $970,000

Surgery $1,200,000 20,000 $3,600,000

Outpatient Adult $560,000 15,000 $720,000

Outpatient Pediatrics $470,000 12,000 $630,000

Total Patient Service Depts. $3,030,000   57,000   $5,920,000

County Hospital Totals $4,880,000   92,500 $5,920,000

27. Assume that managers want to allocate housekeeping costs to the patient service departments. What is the value of the housekeeping cost pool? (2 points)

  1. 8,000 sq feet

  2. 57,000 sq feet

  3. $500,000

  4. $1,850,000

Page 7 of 8

28. Assume that space will be the cost driver and that managers want to use the direct cost allocation method. What is the total amount for the cost driver? (2 points)

  1. 57,000 sq feet

  2. 35,500 sq feet

  3. 92,500 sq feet

  4. None of the above

29. What is the appropriate allocation rate for the housekeeping cost pool if space is the cost driver and using the direct cost allocation method? (2 points)

  1. $5.40 per sq foot

  2. $14.08 per sq foot

  3. $8.77 per sq foot

  4. None of the above

30. Assuming that the cost driver for housekeeping costs is space and using the direct cost allocation method, what is the allocation of housekeeping costs to the Medicine Department? (2 points)

a. $ 87,720
b. $ 54,000
c. $ 140,800
d. None of the above

Solutions

Expert Solution

27.

If managers want to allocate housekeeping costs to the patient service departments, the value of the housekeeping cost pool is $500,000

Housekeeping cost pool is the housekeeping cost

Correct option is (c)

28.

If space is the cost driver and the managers want to use the direct cost allocation method, the total amount for the cost driver is 57,000 square feet.

Total amount of cost driver will be equal to total space of patient service departments

Correct option is (a)

29.

The appropriate allocation rate for the housekeeping cost pool if space is the cost driver and using the direct cost allocation method = Housekeeping cost/Total space

= 500,000/57,000

= $8.77 per square feet

Correct option is (c)

30.

If cost driver for housekeeping costs is space and using the direct cost allocation method, the allocation of housekeeping costs to the Medicine Department = Allocation rate x Space occupied by Medicine department

= 8.7720 x 10,000

= $87,720

Correct option is (a)

Kindly comment in case if you have any doubt. Thanks.

ekkarill92 answered 2 hours ago
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