Healthcare Finance owing data pertain to problems 6.7 and 6. St. Luke\'s Hospita
ID: 2544799 • Letter: H
Question
Healthcare Finance owing data pertain to problems 6.7 and 6. St. Luke's Hospital has three support departments and four departments. The direct costs to each of the support departm b- co General Administration Maintenance Employee Benefits $4,000,000 5,000,000 4,000,000 rC Selected data for the three support and four patient services shown below: departments ate Number of Patient Space Full-Time Services (square Equivalent Revenue feet) Employees He ry Dollars Department Support: General 15 s 2,500,000 8,000 Administration Maintenance Employee Benefits Total Patient Services 10,000 7,000 25,000 75 50 140 3,500,000 3,000,000 S 9,000,000 Meeting Muise, Routine Care $40,000,000 500,000 70018,000,000 200 150 Intensive Care 7,000,000 45,000 Obstetrics Services 4,000,000 35,000 Other Services 12,000,000 200,000 4008 Total 6,000,000 4,000,000 8,000,000 $36,000,000 $45,000,000 Young $63,000,000 780,000 $63,000,000 805,000 1,450 1,590 Grand Total 67 Assume that the hospital uses the direct method for cost allocation. Furthermore, the cost driver for general administration is patient services revenue, the cost driver for maintenance is space utilization, and the cost driver for employee benefits is the number of full-time equivalent employees. a. What are the appropriate allocation rates? b. Use an allocation table similar to Exhibit 6.7 to allocate theExplanation / Answer
Answer
Department
Direct cost ($)
Cost driver
Amount of Cost driver
Allocation rates
General Administration
4000000
Patient Revenue Services
$63000000
0.0635 per $ Revenue services
Maintenance
5000000
Space Utilization
780000 Sqr Feet
$6.41 per Sqr Feet
Employee Benefits
400000
No. of Employee
1450 employees
$275.86 per employee
Allocation of General Administration:
Allocation base ($)
Allocation Rate
Cost Allocated
Routine Care
40000000
0.0635
2540000
Intensive Care
7000000
0.0635
444500
Obsterics Services
4000000
0.0635
254000
Other Services
12000000
0.0635
762000
Total Allocated
63000000
$4000500
Allocation of Maintenance:
Allocation base (Sqr Feet)
Allocation Rate
Cost Allocated
Routine Care
500000
6.41
3205000
Intensive Care
45000
6.41
288450
Obsterics Services
35000
6.41
224350
Other Services
200000
6.41
1282000
Total Allocated
780000
$4999800
Allocation of Employee benefit
Allocation base (No. of employees)
Allocation Rate
Cost Allocated
Routine Care
700
275.86
193102
Intensive Care
200
275.86
55172
Obsterics Services
150
275.86
41379
Other Services
400
275.86
110344
Total Allocated
1450
$399997
Department
Direct cost ($)
Cost driver
Amount of Cost driver
Allocation rates
General Administration
4000000
Patient Revenue Services
$63000000
0.0635 per $ Revenue services
Maintenance
5000000
Space Utilization
780000 Sqr Feet
$6.41 per Sqr Feet
Employee Benefits
400000
No. of Employee
1450 employees
$275.86 per employee
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