Refer to the organization chart for Rocky Mountain General Hospital given in the preceding problem. Ignore the rest of the data in that problem. The following table shows the cost allocation bases used to distribute various costs among the hospital's divisions.

Shown below are the amounts of each cost allocation base associated with each division.

Required:
1. Prepare a table similar to Exhibit 12-5 that distributes each of the costs listed in the preceding table to the hospital's divisions.
2. Comment on the appropriateness of patient billings as the basis for distributing community outreach costs to the hospital's divisions. Can you suggest a better allocation base?
3. Is there any use in allocating utilities costs to the divisions? What purposes could such an allocation process serve?

Cost Pool Cost Allocation Base Annual Cost Facilities $190,000 Building depreclation Equipment depreciation Insurance Square feet of space Utilities Electricity Waste disposal Water and sewer Cable TV and phone Heat Cubic feet of space 24,000 General administration: 220,000 Administrator Administrative staff Office supplies Budgeted number of employees Community outreach: Public education Budgeted dollars of patient billings 40,000 School physical exams Square Feet 15,000 8,000 9,000 8,000 40,000 Cubic Feet 135,000 100,000 90,000 75,000 400,000 Number of Employees 30 20 20 30 100 Patient Billings $2,000,000 1,250,000 750,000 e Division Surgical Division Medical Support Division Administrative Division Total $4,000,000