Problem 1 Keene Clinic, a multispecialty practice in Keene, Texas, has three revenue-producing patient services departments...

 

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Problem 1 Keene Clinic, a multispecialty practice in Keene, Texas, has three revenue-producing patient services departments and one support department. The direct cost of the support department is $400,000 which must be allocate to the three revenue-producing patient services departments using the direct method. Two cost drivers are under consideration: patient services revenue and hours of support services used. The patient services revenue and hours of support services used for each department are as follows: Adult Services Revenue $5,000,000 Support Service Hours 4,400 Pediatric Services $3,000,000 4,000 Other Services $2,000,000 1,600 Total $10,000,000 10,000 a. What is the dollar allocation to each patient services department if patient services revenue is selected as the cost driver? b. What is the dollar allocation to each patient services department if hours of support services used is selected as the cost driver? c. Which of the two drivers is better? Please explain. Problem 1 Keene Clinic, a multispecialty practice in Keene, Texas, has three revenue-producing patient services departments and one support department. The direct cost of the support department is $400,000 which must be allocate to the three revenue-producing patient services departments using the direct method. Two cost drivers are under consideration: patient services revenue and hours of support services used. The patient services revenue and hours of support services used for each department are as follows: Adult Services Revenue $5,000,000 Support Service Hours 4,400 Pediatric Services $3,000,000 4,000 Other Services $2,000,000 1,600 Total $10,000,000 10,000 a. What is the dollar allocation to each patient services department if patient services revenue is selected as the cost driver? b. What is the dollar allocation to each patient services department if hours of support services used is selected as the cost driver? c. Which of the two drivers is better? Please explain.

Answer rating: 100% (QA)

a If patient services revenue is selected as the cost driver the allocation of the support department cost can be determined based on the proportion of patient services revenue generated by each depar... View the full answer