Direct and Indirect Costs Review the chapter text regarding direct and indirect

Question

Direct and Indirect Costs Review the chapter text regarding direct and indirect costs. In particular review the example of freestanding dialys center direct costs (Exhibit 6-1) and indirect costs (Exhibit 6-2). Remember that indirect costs are shared and are sometimes called joint costs or common costs. Because such costs are shared they must be allocated. Also, remem that one test of a direct cost is to ask: "If the operating unit (such as a department) did not exist, would this cost no in existence?" Allocating Indirect Costs Study Table 6-1, Example of Rehab Cost Center Direct and Indirect Cost Totals, and Table 6-2, Example of Indirect C Allocated to Rehab Cost Center, and review the chapter text describing how the indirect cost is allocated. This assignment will change the allocation bases input for A) Number of Visits (Volume), B) Proportion of Direct Costs, an C) Number of Computers in Service. Required Compute the costs allocated to cost centers "Clerical Salaries. "Administrative Salaries": and "Computer Services" usi the new allocation bases shown below. Use worksheet #1, which is attached here and replicates the set up in Table 6-2. Total the new results. AE6-1-1.doc

Explanation / Answer

worksheet 1: Allocation Basis Clerical Salaries Admin Salaries Computer Services Total Indirect Cost A B C Indirect cost to be allocated 56000 55000 80000 191000 Allocated to: Physical Therapy PT 9600*3.5=33600 55000*0.6=33000 10*5000=50000 116600 Occupational Therapy OT 4000*3.5=14000 55000*0.25=13750 3*5000=15000 42750 Speech Therapy ST 2400*3.5=8400 55000*0.15=8250 3*5000=15000 31650 Proof Total 56000 55000 80000 191000 worksheet 2: Rehab Cost Centers Direct Cost Indirect Cost Total Physical Therapy PT 450000 116600 566600 Occupational Therapy OT 187500 42750 230250 Speech Therapy ST 112500 31650 144150 Total 750000 191000 941000

Related Questions

Navigate

• Browse (All)
• Browse D
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.