Question

Perez Health Care Center, Inc. has three clinics servicing the Seattle metropolitan area. The company's legal services department supports the clinics. Moreover, its computer services department supports all of the clinics and the legal services department. The annual cost of operating the legal services department is $559,200. The annual cost of operating the computer services department is $528,000. The company uses the number of patients served as the cost driver for allocating the cost of legal services and the number of computer workstations as the cost driver for allocating the cost of computer services. Other relevant information follows: Number of Patients 7,000 5,100 7,100 Number of Workstations 17 Sewell clinic Alphretta clinic Gwinnett clinic Legal services Computer services m Required a. Allocate the cost of computer services to all of the clinics and the legal services department. b. After allocating the cost of computer services, allocate the cost of legal services to the three clinics c. Compute the total allocated cost of service centers for each clinic. Complete this question by entering your answers in the tabs below. Required A Required B Required C Allocate the cost of computer services to all of the clinics and the legal services department. Allocated Cost Department Sewell clinic Alphretta clinic Gwinnett clinic Legal services Total allocated cost

Answer 1

a.
Allocation rate for computer service	Total overhead costs/Total number of workstations
Allocation rate for computer service	528000/(17+17+23+3)
Allocation rate for computer service	$8,800.00	per workstations
Calculation of costs allocated to each clinic and legal service is shown below
Sewell Clinic	$149,600	17*8800
Alphretta clinic	$149,600	17*8800
Gwinnett clinic	$202,400	23*8800
Legal services	$26,400	3*8800
Total costs allocated	$528,000
b.
Allocation rate for legal services	Total overhead costs/Total number of patients
Allocation rate for legal services	(559200+26400)/(7000+5100+7100)
Allocation rate for legal services	$30.50	per patients
Calculation of legal service costs allocated to each clinic is shown below
Sewell Clinic	$213,500	30.50*7000
Alphretta clinic	$155,550	30.50*5100
Gwinnett clinic	$216,550	30.50*7100
Total costs allocated	$585,600
c.
Total cost allocated to each clinic is shown below
Sewell Clinic	$363,100	(149600+213500)
Alphretta clinic	$305,150	(149600+155550)
Gwinnett clinic	$418,950	(202400+216550)
Total costs allocated	$1,087,200