Use the following information to answer questions 1-3. The housekeeping services department of Ruger Clinic, a...
Use the following information to answer questions 1-3.
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.
What is the value of the cost pool (in dollars)?
What is the allocation rate if patient service revenue is used as the cost driver?
What is the allocation rate if hours of housekeeping services are used as the cost driver?
Refer to the previous problem. Assume that the three
patient services departments at Ruger Clinic are adult services,
pediatric services and other services. The patient services revenue
and hours of housekeeping services for each department are as
follows:
|
Department |
Revenue |
Housekeeping Hours |
|
Adult Services |
$3,000,000 |
1,500 |
|
Pediatric Services |
1,500,000 |
3,000 |
|
Other Services |
500,000 |
500 |
|
Total |
$5,000,000 |
5,0001. |
What is the dollar allocation to the Adult
Services department with patient services revenue issued
as the cost driver? Include commas in your answer Ex. 90,000 NOT
90000
Homework Answers
Part 1
Value of the cost pool (in dollars) = $100000 (indirect costs)
Part 2
Allocation Rate = Indirect Cost / Patient service revenue= $100000 / $5000000 =
0.02 per patient service revenue
Part 3
Allocation Rate = Indirect Cost / Housekeeping service hours = $100000 / 5000= $20 per housekeeping hours
Dollar allocation to the Adult Services department with patient services revenue = $3000000*0.02 per patient service revenue = $60000
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