Data

Variable Cost per Visit

$10.00

Projected Number of Visits

10000

Total Variable Cost

$100,000

Annual Direct Fixed Cost

$500,000.00

Overhead

$50,000.00

Total Cost

$650,000

Desired Profit

$650,000

Price Needed for Profit

Calculate the price required to achieve desired profit

Cost Allocation Exercise

Use the Direct Method Approach

Projected Revenues by patient services department

Amount

Routine care

$14,000,000

Laboratory

$5,000,000

Radiology

$3,500,000

Total Revenues

$22,500,000

Projected Costs for all departments:

Patient Services Departments (Direct Cost)

Routine care

$3,300,000

Laboratory

$3,750,000

Radiology

$1,100,000

Total Costs

$8,150,000

Support Services Department (Overhead Costs)

Financial Services

$1,000,000

Facilities

$2,600,000

Housekeeping

$1,200,000

Administration

$3,000,000

Personnel

$1,600,000

Totals Costs

$9,400,000

Total Costs of both patient and support services

$17,550,000

Projected Profit

$4,950,000

Key Information
Cost Drivers				Unit Measure
Financial Services				Patient Services Revenue
Facilities				Square Footage
Housekeeping				Labor Hours
Administration				Salary Dollars
Personnel				Salary Dollars
		Patient Services		Square Ft		Housekeeping		Salary Dollars
		Revenue				Labor Hours
Routine care		$14,000,000		165,000		68,000		$4,000,000
Laboratory		$5,000,000		30,000		3,800		$750,000
Radiology		$3,500,000		65,000		7,400		$1,056,300
Total		$22,500,000		260,000		79,200		$5,806,300
COMPLETE THE TABLE (Need to calculate allocation rate)
Overhead Allocation Rates
				Cost Pool		Cost Driver		Total utilization		Allocation Rate
Financial Services				$1,000,000		Patient Services Revenue		$22,500,000
Facilities				$2,600,000		Square Footage		260,000
Housekeeping				$1,200,000		Labor Hours		79,200
Administration				$3,000,000		Salary Dollars		$5,806,300
Personnel				$1,600,000		Salary Dollars		$5,806,300