Question

1. In the past, the medical center has aggregated all facilities costs, and then allocated the total amount on the basis of square footage. This methodology assigns an average cost rate to each patient service department regardless of whether its space is new or old, or prime or poor. The proposed allocation for the Dialysis Center, on the other hand, requires it to bear the true facilities costs of its new space. What are the advantages and disadvantages of the new methodology? Do you support the new allocation scheme?

Answer 1

I agree with the new methodology as the true cost is incurred by it, whereas new or old space was not regarded by the old allocation scheme.

Marxist Approach should be agreed upon by us, each department individually will be tailored by it.

More cost is allocated towards the revenue producing departments respectively, under Marxist approach.

Outpatient center’s profit margin is far high than that of the dialysis center and also its total overhead are lesser than the dialysis center

Advantages and disadvantages of the new methodology.

1. More fair cost allocation is made under the new methodology.

2. Its True quality is recognized

3. As same equipment and staff are being used, a break can be given.

4. Already the same equipment and Personnel are used by the dialysis center.

Disadvantages.

1. It Costs the Dialysis Center, more cost per square foot

2.The chances of generating true profit is seized, to bear the true costs by the dialysis center.