Wellspring Community Hospital has two patient service departments, medicine and

Question

Wellspring Community Hospital has two patient service departments, medicine and surgery. The patient service departments are supported by the housekeeping department, the financial services department, and the administration department. The administration department of Wellspring Community Hospital has compiled the following information:

Housekeeping
$200,000 direct costs
3,000 square feet
250 employees

Administration
$400,000 direct costs
5,000 square feet
500 employees

Financial services
$300,000 direct costs
2,000 square feet
100 employees

Medicine
$1 million direct costs
53,000 square feet
2,600 employees

Surgery
$1.5 million direct costs
40,000 square feet
2,300 employees

Wellspring has determined that the cost driver for housekeeping is square feet and that the cost driver for administration and financial services is the number of employees. Using the direct method of cost allocation, what is the allocation of financial services costs to medicine?

Explanation / Answer

c) $159,184

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