XYZ Hospital
	Housekeeping	H/R	Gen Admin	ICU Care	Routine Care	Total
Revenue	-	-	-	5,000,000	7,000,000	$12,000,000
Direct Costs	(1,500,000)	(1,000,000)	(2,000,000)	(2,750,000)	(4,000,000)	(11,250,000)
Allocated Costs
Housekeeping						-
Human Resources						-
General Admin						-
Profit/(Loss)	(1,500,000)	(1,000,000)	(2,000,000)	2,250,000	3,000,000	$750,000
House Keeping Labor Hours	250	500	1,000	30,000	20,000	51750
Employees	20	5	10	15	25	75
Square Feet	500	1,000	2,000	10,000	20,000	33,500

XYZ Hospital does not allocate Support Costs by Dept to Patient Service Depts, and has historically done P&L statement.

Part 1: Use Step Down cost allocation method to allocate Support Dept Costs to Patient Service Depts in order to know profitability of each Patient Service Dept. Allocate costs in this order and by 3 following methods:

1) Housekeeping by Square Feet
2) Human Resources: by Number of Employees
3) General Administration: By Revenue

Complete a dept cost allocation schedule identifying all relevant allocation rates, amounts allocated, cost pools, drivers, etc. and a final Profit and Loss calculation by Patient Service Dept for each of the 3 methods.

Ex:

Cost Pool for:	Housekeeping by SF
Department			Allocation Rates	$'s Allocated
Housekeeping
H/R
Gen Admin
ICU Care
Routine Care
Total of Driver			Allocated Costs	$-
Allocation rate:			Costs to Allocate
				$0

Part 2: Apply housekeeping labor hours rather than square feet to allocate housekeeping costs for each of the three methods.

Answer rating: 100% (QA)

Solution Part 1 Working note for cost allocation by support dept to Patient Service Dept a Calculati... View the full answer