shown below Services Space Number crvicessq FullTime Equival

shown below Services Space Number crvices(sq Full-Time Equivalent Employees ons, see Finkler, S. A Patient Space Heal uare Salary feet Department Support: General Revenue Dollars Young, D. York 8,000 15 $2,500,000 Administration Maintenance Employee Benefits Total Patient Services: In additi Cooper, ER Mecting, Muise, Young 10,000 7,000 25,000 75 50 140 3,500,000 3,000,000 $9,000,000 Routine Care $40,000,000 500,000 7,000,000 45,000 Obstetrics Services 4,000,000 35,000 700 $18,000,000 6,000,000 4,000,000 8,000,000 $36,000,000 $45,000,000 Intensive Care 200 150 Other Services Total Grand Total $63,000,000 780,000 $63,000,000 805,000 12,000,000 200,000400 1,450 1,590 6.7 Assume that the hospital uses the direct method for cot llcation Furthermore, the cost driver for general administration is patient services revenue, the cost driver for maintenance is space utilization, and the cost driver for employee benefits is the number of full-time equivalent employees a. What are the appropriate allocation rates? b. Use an allocation table similar to Exhibit 6.7 to allocate the hospital\'s overhead costs to the patient services departments.

Solution

Solution 6.7a:

Solution 6-7b:

Cost Allocation to Patient Service Departments

Determination of Allocation rates
Support department	Overhead cost	Allocation base	Usage of Allocation Base	Allocation rate
General administration	$2,500,000.00	Patient service revenue	$63,000,000.00	$0.04
Maintenance	$3,500,000.00	Space utilization	780000	$4.49
Employee benefits	$3,000,000.00	Nos of full time equivalent employees	1450	$2,068.97
Total	$9,000,000.00