Analyze the following scenario: Jump Hospital currently allocates all maintenanc

Question

Analyze the following scenario: Jump Hospital currently allocates all maintenance department costs based on departmental square feet. However, the manager of the pharmacy department has suggested that an ABC approach be used for the portion of the maintenance department costs that relate to repairing equipment. Her contention is that the pharmacy has relatively little equipment that breaks. However, it must subsidize many high-tech departments that require expensive equipment repairs. Using the tables below, calculate the maintenance cost assigned to the pharmacy using the existing method and using an ABC approach. Clearly label your calculations in your analysis.

                                                         maintence cost

volume = 100,000 for routine maintence / for repairs = 800

labor hour=10,000 for rountine maintence / repairs = 4000 /total = 14,000

labor cost = $12.00 for routine maintenence /repairs = 18.00/ total = $13.71

supplies = $20,000 rountine maintence / repairs = $80, 000 /total =$ 100,000

administion= total = $15,000

                                                    dept. info

square feet =2000 for pharmancy and 98,000 for all other/ total is 100,000

volume of repairs= 3 for pharmacy and 797 for all other dept /total is 800

hours of repairs= 6 for pharacy and 3,994 for all other depts./ and total is 4000

supplies used for repairs= 200 for pharmacy and $79,800 for all other dept./ total is $80,000

Explanation / Answer

labor hour= 4000 /total = 14,000 labor cost = 18.00/ total = $13.71 supplies = $80, 000 /total =$ 100,000 total = $15,000

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