Question
In: Accounting
Tacoma Hospital has three support departments and four patient services departments. The direct costs to each...
Tacoma Hospital has three support departments and four patient services departments. The direct costs to each of the support departments are as follows:
Tacoma Hospital has three support departments and four patient services departments. The direct costs to each of the support departments are as follows:
|
Direct Costs |
Cost Driver |
|
|
General Administration |
$2,000,000 |
Salary Dollars |
|
Facilities |
$5,000,000 |
Housekeeping Labor Hours |
|
Financial Services |
$3,000,000 |
Patient Services Revenue |
|
Total |
$10,000,000 |
The patient services revenue, salary dollars, and housekeeping labor hours for each department are as follows:
|
Revenue |
Salary Dollars |
Housekeeping Labor Hours |
|
|
General Administration |
$1,500,000 |
2,000 |
|
|
Facilities |
$3,000,000 |
5,000 |
|
|
Financial Services |
$2,000,000 |
3,000 |
|
|
Routine Care |
$30,000,000 |
$12,000,000 |
150,000 |
|
Intensive Care |
$4,000,000 |
$5,000,000 |
30,000 |
|
Diagnostic Services |
$6,000,000 |
$6,000,000 |
15,000 |
|
Other Services |
$10,000,000 |
$7,000,000 |
25,000 |
Assume that the hospital uses the step-down method for cost allocation (see pages 230 0 232), with salary dollars as the cost driver for general administration, housekeeping labor hours as the cost driver for facilities, and patient services revenue as the cost driver for financial services. Assume also that the general administration department provides the most services to other support departments, followed closely by the facilities department. The financial services department provides the least services to the other support departments.
a. Use an allocation table to allocate the hospital’s overhead costs to the patient services departments.
b. Is the direct method or the step-down method better for cost allocation within Tacoma Hospital’s? Please explain.
Solutions
Expert Solution
| Allocation of support department overhead costs based on drivers will be as follows: | |||||
| Total | Routine Care | Intensive Care | Diagnostic Services | Other Services | |
| General Administration (12:5:6:7) | 20,00,000 | 8,00,000 | 3,33,333 | 4,00,000 | 4,66,667 |
| Facilities (15:3:1.5:2.5) | 50,00,000 | 34,09,090.91 | 6,81,818.18 | 3,40,909 | 5,68,182 |
| Financial Services(30:4:6:10) | 30,00,000 | 18,00,000 | 2,40,000 | 3,60,000 | 6,00,000 |
| Total Overhead Costs | 1,00,00,000 | 60,09,091 | 12,55,152 | 11,00,909 | 16,34,848 |
b.
| Step down method is better for cost allocation within Tacoma Hospital because support department are providing services to each other, therefore in order ensure correct allocation, support department cost should be allocated to other support department and after that cost should be allocated to patient service department |
ekkarill92 answered 1 year agoRelated Solutions
ABC Corporation has three support departments with the following costs and cost drivers: Support Department Cost...
ABC Corporation has three support departments with the following
costs and cost drivers: Support Department Cost Cost Driver
Graphics Production $200,000 number of copies made Accounting
500,000 number of invoices processed Personnel 400,000 number of
employees ABC has three operating divisions, Micro, Macro, and
Super. Their revenue, cost, and activity information are as
follows: Micro Macro Super Revenues $700,000 $850,000 $650,000
Direct operating expenses 50,000 70,000 100,000 Number of copies
made 20,000 30,000 50,000 Number of invoices processed 700 800...
Problem 1 The All Souls Hospital has three service departments (Nursing Support, Maintenance and Administration) and...
Problem 1
The All Souls Hospital has three service departments (Nursing
Support, Maintenance and Administration) and two operating
departments (Inpatient and Outpatient.) Selected data from a recent
period on the five departments follows.
Service
Departments
Operating Departments
Nursing Support
Maintenance
Administration
Inpatient
Outpatient
Total
Direct Costs
$140,000
$105,000
$48,000
$275,000
$430,000
$998,000
Number of Employees
60
35
140
315
210
760
Square Feet of Space Occupied
15,000
10,000
20,000
40,000
100,000
185,000
Patient Hours
30,000
60,000
90,000
Hospital Administrators use...
In order to allocate service departments' costs to production departments, there are three allocation methods (direct,...
In order to allocate service departments' costs to production
departments, there are three allocation methods (direct, step-down,
and reciprocal). Use your own example to show the calculation and
difference among these methods.
The following data pertain to problems 6.3 through 6.6: St. Benedict’s Hospital has three support departments...
The following data pertain to problems 6.3 through 6.6:
St. Benedict’s Hospital has three support departments and four
patient services departments. The direct costs to each of the
support departments are 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 services
departments are shown below:
department
patient services revenue
space (sq ft.)
Housekeeping labor hours
salary dollars
General administration
10,000
2,000
$1,500,000
Facilities
20,000
5,000
3,000,000
Financial Services
15,000
3,000...
Karen’s Restaurant has three sales revenue departments with direct costs and average monthly figures given in...
Karen’s Restaurant has three sales revenue departments with
direct costs and average monthly figures given in the following
information:
Departments
Dining
Banquets
Beverages
Sales revenue
$306,000
$165,000
$138,000
Cost of sales
$122,400
$62,700
$44,160
Wages and salaries cost
$97,920
$52,800
$19,320
Other direct costs
$27,540
$13,200
$2,760
The restaurant also has the following indirect, undistributed
costs:
Administrative and general expenses
$18,000
Marketing expenses
$15,000
Utilities expense
$
7,500
Property operation and maintenance ...
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
$107,000
$341,060
$289,020
$455,900
$600,500
$545,800
$2,339,280
Meals served
2,800
6,000
3,000
80,000
91,800
Square feet of space
7,000
19,000
10,500
16,000
9,500
128,000
190,000
Files processed
24,000
17,000
45,000
86,000
The...
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...
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
$105,000
$337,060
$285,020
$450,900
$592,500
$538,800
$2,309,280
Meals served
2,600
5,600
2,800
78,800
89,800
Square feet of space
6,800
18,400
10,100
15,400
9,300
126,000
186,000
Files processed
23,000
16,000
43,000
82,000
The...
South Lancaster Clinic, a multispecialty practice in Boston, Massachusetts, has three revenue-producing patient services departments and...
South Lancaster Clinic, a multispecialty practice in Boston,
Massachusetts, has three revenue-producing patient services
departments and one support department. The direct cost of the
support department is $100,000 which must be allocate to the three
revenue-producing patient services departments using the direct
method. Two cost drivers are under consideration: patient services
revenue and hours of support services used. The patient services
revenue and hours of support services used for each department are
as follows
Revenue
Support Service Hours
Adult Services...
Direct Method Eilers Company has two producing departments and two support departments. The following budgeted data...
Direct Method
Eilers Company has two producing departments and two support
departments. The following budgeted data pertain to these four
departments:
Support Departments
Producing Departments
General Factory
Receiving
Assembly
Finishing
Direct overhead
$470,000
$150,000
$48,000
$76,000
Square footage
—
2,200
4,400
4,400
Number of receiving orders
360
—
2,000
1,150
Direct labor hours
—
—
27,000
49,000
The company has decided to simplify its method of allocating
support service costs by switching to the direct method.
Required:
1. Allocate the...
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- You have invested 30 percent of your portfolio in Jacob, Inc., 40 percent is Bella Co.,...
- Parallel Arrays This question is in MindTap Cengage Summary In this lab, you use what you...
- 5. You have invested 30 percent of your portfolio in Jacob, Inc., 40 percent is Bella...
- JAVA Write a test program that prompts the user to enter a series of integers and...
- (2) Cite an example on how organizations like Google, Facebook, Youtube etc collect data for image...
- The legal landscape is perpetually changing. Psychologists must remain abreast of these changes to avoid potentially...
- We are evaluating a project that costs $1.68 million, has a six-year life, and has no...
ADVERTISEMENT