Question

Northern Medical Clinic (NMC) has two service departments – Building Services and Energy. NMC also has three operating departments – Pediatrics, Geriatrics and Surgery. NMC allocates the Building Services department costs on the basis of square metres and the Energy department costs on the basis of kilowatt hours. Pediatrics applies overhead based on the number of children seen. Geriatrics applies overhead based on the number of seniors seen. Surgery applies overhead based on the number of operations performed.

The following table contains budgeted operating data for the upcoming year:

	Service Departments		Operating Departments
	Building Services	Energy	Pediatrics	Geriatrics	Surgery
Overhead before allocation	$800,000	$400,000	$360,000	$240,000	$400,000
Square metres	10,000	20,000	11,000	15,400	17,600
Kilowatt hours	5,000	10,000	15,000	55,000	30,000
Children			5,000
Seniors				4,000
Operations					10,000

Required:

1.	Allocate service department costs to the operating departments using the step-down method. Calculate the predetermined overhead rate for each operating department. Enter negative numbers using a minus sign.
		Service Departments		Operating Departments
		Building Services	Energy	Pediatrics	Geriatrics	Surgery
Overhead before allocation		$800,000	$400,000	$360,000	$240,000	$400,000
Total after allocation		$	$	$	$	$
Predetermined overhead rate				$	$	$

2.	During the last week, the operating departments at NMC saw 100 children, 70 seniors, and performed 150 operations. How much overhead would have been applied during the last month to each operating department?

	Pediatrics	Geriatrics	Surgery
	$	$	$
Overhead applied	$	$	$

Answer 1

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