a. Mr. Smith, the financial controller of LabAid, is convinced that the step-down method allocates more costs to the operating departments than does the direct method. Do you agree with Mr. Smith? Explain. b. Assume that you are the manager of the Daily Patient department. Discuss which method of cost allocation would you prefer. Justify your decision.
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a. Mr. Smith, the financial controller of LabAid, is convinced that the step-down method allocates more costs to the operating departments than does the direct method. Do you agree with Mr. Smith? Explain.
b. Assume that you are the manager of the Daily Patient department. Discuss which method of cost allocation would you prefer. Justify your decision.
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- The California Community Hospital has two service departments, Cafeteria and Housekeeping, and two operating departments Surgery and Outpatient. The hospital uses the direct method to allocate service department costs to operating departments. It allocates Cafeteria costs based on the number of employees. Outpatient $360,000 45,000 Cafeteria Housekeeping $10,000 15,000 Surgery $140,000 15,000 Total Departmental costs before allocation Number of employees $40,000 20,000 $550,000 Knowledge Check 01 How much Cafeteria cost should be allocated to the Surgery department? $6,316 $8,000 $30,000 O $10,000Compton Information Services, Inc., has two service departments: human resources and billing. Compton's operating departments, organized according to the special industry each department serves, are health care, retail, and legal services. The billing department supports only the three operating departments, but the human resources department supports all operating departments and the billing department. Other relevant information follows. Health Legal Services Human Resources Billing Care Retail Number of employees 10 20 80 60 40 Annual cost* $720,000 $1,428,000 $6,000,000 $9,000,000 $4,800,000 $6,200,000 $2,800,000 $4,800,000 Annual revenue *This is the operating cost before allocating service department costs. Required a. Allocate service department costs to operating departments, assuming that Compton adopts the step method. The company uses the number of employees as the base for allocating human resources department costs and department annual revenue as the base for allocating…The California Community Hospital has two service departments, Cafeteria and Housekeeping, and two operating departments, Surgery and Outpatient. The hospital uses the direct method to allocate service department costs to operating departments. It allocates Cafeteria costs based on the number of employees. Departmental costs before allocation Number of employees Cafeteria $40,000 20,000 $6,316 $8,000 $30,000 $10,000 Housekeeping Surgery $10,000 $140,000 15,000 15,000 Knowledge Check 01 How much Cafeteria cost should be allocated to the Surgery department? Outpatient $360,000 45,000 Total $550,000
- Behrend Clinic uses the direct method to allocate service department costs to operating departments. The clinic has two service departments, Personnel and Support, and two operating departments, Prenatal and Pediatrics. Service Department Operating Department Personnel Support $ 55,040 Prenatal Pediatrics $ 29, 200 $ 242,050 $ 423,200 Departmental costs Employee hours Space occupied 5,000 1,000 26,000 14,000 3,000 2,000 35,000 8,000 Personnel Department costs are allocated on the basis of employee hours and Support Department costs are allocated on the basis of space occupied in square feet. The total Pediatrics Department cost after the allocations of service department costs is closest to: Multiple Choice $441,260 $443,660 $433,440 $444,471Yellville Regional Hospital is a small hospital with two service departments and three revenue areas: Service Department Direct Costs Square Feet Laundry Pounds Housekeeping (HK) $ 80,000 - 16,000 Laundry $ 132,000 500 - Revenue Areas: Surgery $ 400,000 1,500 48,000 Semiprivate rooms $ 200,000 2,000 24,000 Maternity $ 150,000 1,000 12,000 The hospital wants to allocate the service department costs to the revenue areas. Housekeeping is allocated based on square footage; Laundry is allocated based on pounds of laundry. The normal capacity for Surgery is 200 hours per month; normal capacity for semiprivate rooms is 600 patient days; and normal capacity for maternity is 200 patient days.Required:Determine the overhead rate for the three revenue areas. Allocate the service department costs to the revenue…Compton Information Services, Inc., has two service departments: human resources and billing. Compton's operating departmen organized according to the special industry each department serves, are health care, retail, and legal services. The billing depart supports only the three operating departments, but the human resources department supports all operating departments and th billing department. Other relevant information follows. Number of employees Annual cost* Annual revenue Req A1 Billing Human Resources 10 $720,000 $1,428,000 $6,000,000 Department Req A2 Health Care Retail Legal Services Total Complete this question by entering your answers in the tabs below. Req B1 *This is the operating cost before allocating service department costs. Required a. Allocate service department costs to operating departments, assuming that Compton adopts the step method. The company the number of employees as the base for allocating human resources department costs and department annual revenue as…
- S Zachary Health Care Center Incorporated has three clinics servicing the Seattle metropolitan area. The company's legal services department supports the clinics. Moreover, its computer services department supports all of the clinics and the legal services department. The annual cost of operating the legal services department is $316,050. The annual cost of operating the computer services department is $451,000. The company uses the number of patients served as the cost driver for allocating the cost of legal services and the number of computer workstations as the cost driver for allocating the cost of computer services. Other relevant information follows. Number of Patients 6,900 5,300 7,100 Number of Workstations Sewell clinic Alphretta clinic Gwinnett clinic Legal services Computer services Required a. Allocate the cost of computer services to all of the clinics and the legal services department. b. After allocating the cost of computer services, allocate the cost of legal services…Compton Information Services, Inc., has two service departments: human resources and billing. Compton's operating departmen organized according to the special industry each department serves, are health care, retail, and legal services. The billing depart supports only the three operating departments, but the human resources department supports all operating departments and th billing department. Other relevant information follows. Number of employees Annual cost* Annual revenue Req A1 Billing Human Resources 10 $720,000 $1,428,000 $6,000,000 Department Req A2 Health Care Retail Legal Services Total Complete this question by entering your answers in the tabs below. Req B1 Human Resources *This is the operating cost before allocating service department costs. Required a. Allocate service department costs to operating departments, assuming that Compton adopts the step method. The company the number of employees as the base for allocating human resources department costs and department…The Housekeeping Services Department of Ruger Clinic, had $100,000 in direct costs during the year. Department Revenue HK Hours Adult Services $3,000,000 1,500 Pediatric Services $1,500,000 3,000 Other Services $ 500,000 500 Total $5,000,000 5,000 What is the value of the cost pool? Which of the two cost drivers is better? Patient service revenue or housekeeping hours? Why?
- Compton Information Services, Inc., has two service departments: human resources and billing. Compton's operating departmen organized according to the special industry each department serves, are health care, retail, and legal services. The billing depart supports only the three operating departments, but the human resources department supports all operating departments and th billing department. Other relevant information follows. Number of employees Annual cost* Annual revenue Req A1 Human Resources 10 $720,000 Department Req A2 Health Care Retail Legal Services Total Complete this question by entering your answers in the tabs below. Req B1 Allocation Rate *This is the operating cost before allocating service department costs. Required a. Allocate service department costs to operating departments, assuming that Compton adopts the step method. The company the number of employees as the base for allocating human resources department costs and department annual revenue as th base for…Toledo Clinic has two patient services departments: Adult Services and Pediatric Services The patient services departments are supported by General Administration, Facilities, and Financial Services. The General Administration Department of Toledo Clinic has compiled the following information: Department General Administration Facilities Financial Services Adult Services Pediatric Services O $420,000 O $280,000 Direct Costs $700,000 Ⓒ$700,000 $300,000 $1,000,000 $3,600,000 $4,400,000 Square Feet 4,000 O Can't tell from the information provided 1,000 5,000 42.000 48,000 Toledo Clinic has determined that the cost driver for General Administration and Financial Services is salary dollars and that the cost driver for Facilities is square feed. Using the direct method of cost allocation, what is the allocation of General Administration costs to Adult Services? Salary Dollars $1,200,000 $800,000 $2,000,000 $12,000,000 $8,000,000Compton Information Services, Inc., has two service departments: human resources and billing. Compton's operating departments, organized according to the special industry each department serves, are health care, retail, and legal services. The billing department supports only the three operating departments, but the human resources department supports all operating departments and the billing department. Other relevant information follows. Health Legal Services Human Resources Billing Care Retail Number of employees Annual cost* 10 20 80 60 40 $6,000,000 $9,000,000 $720,000 $1,428,000 $4,800,000 $6,200,000 $2,800,000 $4,800,000 Annual revenue *This is the operating cost before allocating service department costs. Required a. Allocate service department costs to operating departments, assuming that Compton adopts the step method. The company uses the number of employees as the base for allocating human resources department costs and department annual revenue as the base for allocating…