Womens Medical Center WMG divides Rs business into two depar

Women\'s Medical Center (WMG) divides Rs business into two departments including pediatrics (PD) and gynecology (GY) WMC has $90,000 of raise money that will be used to increase employee salaries. The Center has identified the following cost drivers that could be used to allocate the rarse money to the two departments Physicians\' salaries 400,000 500,000 Number of patients Nurses salaries 600 400 120000 $110,000 Based on this information the supervisor of the gynecology department would be expected to advocate the use of which of the following allocation bases? Muiple Choice Number of petients Nurses salaries The supervisor would be indfierent as to which alocation bese to uve

Solution

Correct answe is option A.Physicians Salary.

When the salary incease is on the base of Physicians salary,GY Department will get higher allocation compared to other department.

GY \'s portion =90,000*[500,000/9,00,000]=$50,000

PD Portion = 90,000-50,000 =40,000

If any allocation is based on any other bases,GY will be having lessor allocation.