Problems 61 The housekeeping services department of Ruger Clinic, a multispecialty practice in Toledo, Ohio, had...

  

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Problems 61 The housekeeping services department of Ruger Clinic, a multispecialty practice in Toledo, Ohio, had $100,000 in direct costs during 2015. 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 revenue and hours of housekeeping services used. The patient services departments generated $5 million in total revenues during 2015, and to support these clinical activities, they used 5,000 hours of housekeeping services. a. What is the value of the cost pool? b. What is the allocation rate if patient services revenue is used as the cost driver? • hours of housekeeping services is used as the cost driver? 6.2 Refer to Problem 6.1. 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 cach department are as follows: Housekeeping Hours 1,500 Revenue Department Adult Services $3,000,000 Pediatric Services 1,500,000 3,000 500,000 $5,000,000 Other Services 500 Total 5,000 althcare Finance 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 is used as the cost driver? c. What is the difference in the allocation to each department between the two drivers? d. Which of the two drivers is better? Why? Problems 61 The housekeeping services department of Ruger Clinic, a multispecialty practice in Toledo, Ohio, had $100,000 in direct costs during 2015. 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 revenue and hours of housekeeping services used. The patient services departments generated $5 million in total revenues during 2015, and to support these clinical activities, they used 5,000 hours of housekeeping services. a. What is the value of the cost pool? b. What is the allocation rate if patient services revenue is used as the cost driver? • hours of housekeeping services is used as the cost driver? 6.2 Refer to Problem 6.1. 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 cach department are as follows: Housekeeping Hours 1,500 Revenue Department Adult Services $3,000,000 Pediatric Services 1,500,000 3,000 500,000 $5,000,000 Other Services 500 Total 5,000 althcare Finance 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 is used as the cost driver? c. What is the difference in the allocation to each department between the two drivers? d. Which of the two drivers is better? Why?

Answer rating: 100% (QA)

a Here are the dollar allocations to each depar... View the full answer