Problem 6.2 please include all equations and solution

214 Healthcare Finance Although this chapter contains a great deal of detail, the most impor tant point to remember is that a sound cost allocation system is required for making good pricing and service decisions, which is the topic of discussion in the next chapter Department Adult Services Pediatric Services Other Services Total Questions 6.1 What are the primary differences between direct and indirect costs? 6.2 What is the goal of cost allocation? 6.3 a. What are the three primary methods of cost allocation? a. What is the doll patient services b. What is the doll hours of housek c. What is the dif tween the two di d. Which of the tw b. What are the differences among them? 6.4 a. What is a cost pool: b. What is a cost driver? 6.5 Under what circumstances should an overhead department be divid 6.6 Effective cost drivers, and hence the resulting allocation system, must 6.7 Briefly describe illustrate) the cost allocation process. (To keep 6.8 Which is the better cost driver for the costs of a hospital's financial c. How is the cost allocation rate determined? ed into multiple cost pools? have what two important attributes? things simple, use the direct method for your illustration.) services department: patient services department revenues or number The following data pertai St. Benedict's Hospital vices departments. The eneral Facilities Financi Selected data for the thre of bills generated? Explain your rationale. 6.9 How docs activity-based costing (ABC) differ from traditional cost- ing approaches? Department Problems upport General 6.1 The housekeeping services department of Ruger Clini c, a multispecial ty practice in Toledo, Ohio, had $100,000 in direct costs during 2011 Administration Facilities Financial Services hese costs must be allocated to Ruger's three revenue-producing pa- tient services departments using the direct method. Two cost drivers are under consideration: patient services revenue and hours of house- keeping services used. The patient services departments generated $5 million in total revenues during 2011, and to support these clinical activities, they used 5,000 hours of housekeeping services. a. What is the value of the cost pool Total Patient Services: Routine Care Intensive Care 4 Diagnostic Services 6 b. What is the allocation rate if Other Services e patient services revenue is used as the cost driver? hours of housekeeping services is used as the cost driver? Total 6.2 Refer to Problem 6.1. Assume that the three patient services depart ments are adult services, pediatric services, and other services. The patient services revenue and hours of housekeeping services for each department are Grand Total $50