In order to get Allocated cost you will need to divide from each department; the

Question

In order to get Allocated cost you will need to divide from each department; the cost pool by total Utilization (Cost driver). The allocation rates are found below in the chart Total Allocation Rate Cost Pool Utilizatior Cost Driver Patient Department Financial Services Facilities Housekeepin Administration 4,400,000 Personnel $1,500,000 80,000,000 300,600 91,000 10,183,000 10,183,000 0.02Revenue 3,800,000 1,600,000 12.64|Square Feet 17.58 Labor Hours 0.43 Salary Dollars 0.25 Salary Dollars 2,550,000 For the second portion, to get the allocated cost for each department you will need to times it by the allocated rate to get the new allocated cost Allocation Primary Patient Care $750,000.00 0.02) $2,525,748.50 Cost Driver Rate Labs Imaging Total $637,500.00 Financial ($40,000,000*($34,000,000* $1,500,000.00 Patient Revenue $112,500.00 ($6,000,000 *0.02) Services 0.02 0.02) $500,598.80 $773,652.69 (61,200 12.64) Facilities Square Feet $3,800,00.00 12.64(199,800 *12.64)(39,600*1264) 17.58(76,000* 17.58) 0.43 (5,709,000*0.4 2,035,000*0.43)(2,439,000*0.43) $4,400,000.00 0.25 (5,709,000*0.25)(2,035,000*0.25)(2,439,000*0.25) $2,550,000.00 $1,336,263.74 $2,466,817.24 $1,429,632.72 $105,494.51 (6,000*17.58) $879,308.65 $158,241.76 (9,000*17.58) Labor Hours Housekeeping $1,600,000.00 $1,053,874.10 Administration | Salary Dollars $509,599.33 $610,767.95 Salary Dollars Personnel Total Allocated Cost $8,508,462.20 $2,632,501.29 2,709,036.50 $13,850,000.00

Explanation / Answer

a. recalculation done above

b. no the most profitable profir centr e doesnot change.

c. NO , no profit centr e operates at loss.

d. as a manager of imaging profir centr e i would have prefered 1 st approach(given).

e. as a manger of primary patient care i would have profit 2 nd approach (recalculated).

Department cost pool Total utilisation Allocation rate Cost driver financial services      1,500,000.00            100,000.00 15 no. of bills facilities      3,800,000.00            300,600.00 12.64 Square feet housekeeping      1,600,000.00              91,000.00 17.58 labor hours administration      4,400,000.00      10,183,000.00 0.43 salary dollars personnel      2,550,000.00      10,183,000.00 0.25 salary dollars

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