11. Using the Step-Down Method for this problem. Accounting - Billing has a total cost pool of $2,112,600. The cost driver has been determined to number of procedures. What would the allocation rate be for Accounting/Billings? (Hint: round to the third decimal place)
Choice A: $11.31 per procedure
Choice B: $1.565 per procedure
Choice C: $3.32 per procedure
Choice D: $8.00 per procedure
#12. Using the Step-Down Method for this problem. Now that you have calculated the new allocation rate for Accounting/Billing (use your choice from #11 – this will have to be rounded out to 3 digits). What is the amount of Accounting/Billing’s related expense that you would allocate to the Routine Care Department? (Hint: round to the second decimal place)
Choice A: $260,050
Choice B: $540,300
Choice C: $782,500
Choice D: $1,005,000
#13. Using the Step-Down Method for this problem. What would be the total expense for the Routine Care department (this is the addition of direct department expenses and allocated indirect costs). (Hint: round to the second decimal place)
Choice A: $695,750
Choice B: $1,483,000
Choice C: $11,486,250
Choice D: $29,919,780
Homework Answers
11. Choice B: $1.565 per procedure
Explanation:
Accounting - Billing Cost = $2,112,600
Total Number of procedures = 1,350,000
Allocation rate = $2,112,600 / 1,350,000 i.e. $1.565 per procedure
12. Choice C: $782,500
Explanation:
Allocation rate per procedure = $1.565 per procedure
Procedures in Routine Care = 500,000
Cost allocated to Routine care = 500,000 procedures * $1.565 per procedure i.e. $782,500
13. Choice C: $11,486,250
Explanation:
Cost of facilities = $1,800,000
Area utilized by other departments = 320,000 square feet
Cost allocation rate = $1,800,000 / 320,000 i.e. $5.63 per square feet
Cost allocated to routine care = 125,000 sq. feet * $5.63 per square feet i.e. $703,750
Total cost of Routine Care = $10,000,000 + $782,500 + $703,750
= $11,486,250
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