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In: Accounting

Woodbury Hospital has three service departments and three operating departments. Estimated cost and operating data for...

Woodbury Hospital has three service departments and three operating departments. Estimated cost and operating data for all departments in the hospital for the forthcoming quarter are presented in the table below:

Service Departments

Operating Departments
Housekeeping Services Food Services Administrative Services Laboratory Radiology General Hospital Total
Total cost $93,000 $313,060 $261,020 $420,900 $544,500 $496,800 $2,129,280
Meals served 1,400 3,200 1,600 71,600 77,800
Square feet of space 5,600 14,800 7,700 11,800 8,100 114,000 162,000
Files processed 17,000 10,000 31,000 58,000

The costs of the service departments are allocated by the step-down method using the allocation bases and in the order shown in the following table:

Service Department Allocation Bases
Housekeeping Services Square feet of space
Food Services Meals served
Administrative Services Files processed

All billing in the hospital is done through Laboratory, Radiology, or General Hospital. The hospital’s administrator wants the costs of the three service departments allocated to these three billing centers.

Required:

Using the step-down method, prepare the cost allocation desired by the hospital administrator. Include under each billing center the direct costs of the center, as well as the costs allocated from the service departments. (Please enter allocations from a department as negative and allocations to a department as positive. The line should add across to zero. Do not round intermediate calculations. Round your answers to the nearest whole dollar amount.)

Solutions

Expert Solution

Housekeeping services Food services Administartive services Laboratory Radiology General hospital
Departmental costs before allocations $93,000 $313,060 $261,020 $420,900 $544,500 $496,800
Allocations
Housekeeping services costs ($93,000) $8,800 $4,579 $7,017 $4,816 $67,788
Food service costs ($321,860) $5,792 $13,238 $6,620 $296,210
Administrative service cost ($271,391) $79,545 $46,792 $145,054
Total $0 $0 $0 $520,700 $602,728 $1,005,852

Explanation:

Housekeeping:

Food services =$93,000×14,800/156,400 =$8,800

Administrative=$93,000×7,700/156,400 =$4,579

Laboratory=$93,000×11,800/156,400 =$7,017

Radiology=$93,000×8,100/156,400 =$4,816

General hospital=$93,000×114,000/156,400 =$67,788

Food services:

Administrative =$321,860×1,400/77,800 =$5,792

Laboratory =$321,860×3,200/77,800 =$13,238

Radiology=$321,860×1,600/77,800 =$6,620

General hospital=$321,860 ×71,600/77,800 =$296,210

Administrative :

Laboratory=$271,391×17,000/58,000 =$79,545

Radiology=$271,391 ×10,000/58,000 =$46,792

General hospital =$271,391 ×31,000/58,000 =$145,054

ekkarill92 answered 2 years ago
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