The Housekeeping services department of ABC Hospital had $250,000 in direct cost

Question

The Housekeeping services department of ABC Hospital had $250,000 in direct costs during 2006. These costs must be allocated to ABC's three revenue-producing patient services departments using the direct method. Two cost drivers are under consideration: patient services revenue and hours of housekeeping servies utilized. The patient services departments generated $8 million in total revenues during 2006, and to support these clinical activities, used 7,000 of housekeeping services.

What is the value of the cost pool?

A) $100,000

B) $ 250,000

C) $ 8,000

D) $ 4.0 million

Explanation / Answer

B

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