4.4 The Housekeeping Services Department of Ruger Clinic, a multispecialty practice in Toledo, Ohio, had $100,000...

 

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4.4 The Housekeeping Services Department of Ruger Clinic, a multispecialty practice in Toledo, Ohio, had $100,000 in direct costs during the year, These costs must be allocated to Ruger's three revenue-producing patient services departments using the direct method. Two cost drivers are under consideration: patient services rev- enue and hours of housekeeping services used. The patient services departments generated a total of $5 million in revenues during the year. To support these clinical activities, the departments used 5,000 total hours of housekeeping services. What is the value of the cost pool? a. b. What is the allocation rate if (1) patient services revenue is used as the cost driver and if (2) hours of housekeeping services are used as the cost driver? Refer to problem 4.4. Assume that the three patient services departments are Adult Services, Pediatric Services, and Other Services. The patient services revenue and hours of housekeeping services for each department are as follows: Department Revenue Housekeeping Hours Adult Services $3,000,000 1,500 Pediatric Services 1,500,000 3,000 Other Services 500,000 500 Total $5,000,000 5,000 a. What is the dollar allocation to each patient services department if patient services revenue is used as the cost driver? b. What is the dollar allocation to each patient services department if hours of housekeeping support are used as the cost driver? C. What is the dollar difference in the amount allocated to each department be- tween the two drivers? d. Which of the two drivers is better? Why? 4.4 The Housekeeping Services Department of Ruger Clinic, a multispecialty practice in Toledo, Ohio, had $100,000 in direct costs during the year, These costs must be allocated to Ruger's three revenue-producing patient services departments using the direct method. Two cost drivers are under consideration: patient services rev- enue and hours of housekeeping services used. The patient services departments generated a total of $5 million in revenues during the year. To support these clinical activities, the departments used 5,000 total hours of housekeeping services. What is the value of the cost pool? a. b. What is the allocation rate if (1) patient services revenue is used as the cost driver and if (2) hours of housekeeping services are used as the cost driver? Refer to problem 4.4. Assume that the three patient services departments are Adult Services, Pediatric Services, and Other Services. The patient services revenue and hours of housekeeping services for each department are as follows: Department Revenue Housekeeping Hours Adult Services $3,000,000 1,500 Pediatric Services 1,500,000 3,000 Other Services 500,000 500 Total $5,000,000 5,000 a. What is the dollar allocation to each patient services department if patient services revenue is used as the cost driver? b. What is the dollar allocation to each patient services department if hours of housekeeping support are used as the cost driver? C. What is the dollar difference in the amount allocated to each department be- tween the two drivers? d. Which of the two drivers is better? Why?

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Answer 44 a Value of cost pool 100000 direct cost b Allocation rate a Patient service r... View the full answer