Jump Hospital currently allocates all maintenance department costs based on departmental square feet. However, the manager of the pharmacy department has suggested that an ABC approach be used for the portion of the maintenance department costs that relate to repairing equipment. Her contention is that the pharmacy has relatively little equipment that breaks. However, it must subsidize many high- tech departments that require expensive equipment repairs. Using the data at the top of the next page, calculate the maintenance cost assigned to the pharmacy using the existing method and using an ABC approach.

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Maintenance Costs Repairs 800 4,000 18.00 $80,000 Total Volume (Square Feet) Labor Hours Labor Cost/Hour Supplies Administration Routine Maintenance 100,000 10,000 12.00 20,000 14,000 $13.71 $100,000 15,000 Department Infomation Total 100,000 4,000 Pharmacy Square Feet Volume of Repairs Hours of Repairs Supplies Used for Repairs 200 All Other Departments 98,000 3,994 2,000 797 800 6 $79,800 $80,000