Community Recovery Clinic offers two types of services: inpatient and outpatient
ID: 2476832 • Letter: C
Question
Community Recovery Clinic offers two types of services: inpatient and outpatient. They have two types of service departments: administration and housekeeping. Direct costs of nursing care and supplies can be traced directly to the patient. Overhead costs for each department are as follows: Administration is allocated based on number of employees and housekeeping is based on square footage. Carry out calculations to four decimal places. Allocate service department costs using the direct method. Allocate service department costs using the reciprocal method. What is the other method of allocation? Briefly discuss the pros and cons of each method and select the best one.Explanation / Answer
3 Other Method of allocation is Step down method
4 Direct Cost allocation Method is the traditional and Most Simple method to allocate the cost. It allocates service department cost directly between the production department.It is simple and easy to understand and calculate. It is based on the assumption that the Service department does not provide service inter departmentally. However it is not correct in the practice so it is not full proof.
Reciprocal Method of Allocation is the allocation of Service department cost on the assumption that service department interdepartmentally provides the services so it is more efificient allocation of cost however it is very complex in calculation.
Community Recovery Clinic Allcation of Service Department Cost Direct Method Department Particulars Ratio Inpatient Outpatient Administration 2:01 333333.3333 166667.6666 Housekeeeping 2:01 133333.3333 66666.6666 Total Allocated Cost 466666.6666 233334.3332 Community Recovery Clinic Allcation of Service Department Cost Reciprocal Method Impatient Outpatient Administration Housekeeping Overhead Cost before allocation 0 0 500000 200000 Allocation of Housekeeping 4:02:01 114285.7143 57142.8571 28571.43 -200000 Cost After allocation of Housekeeping 114285.7143 57142.8571 528571.4 0 Allocation of Administration 2:01 352380.9524 176190.4762 -528571 0 Cost after allocation of Administration 466666.6667 233333.3333 0 0Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.