Will you check my answers and show me how to solve # 5&6?

Use the following information for problems #1-6.

St. Anthony's Hospital has three support departments and four patient services departments.

The direct costs to each of the support departments are as follows:

General Administration $3,000,000
Facilities $6,000,000
Financial Services $7,000,000

Selected data for the three support and four patient services departments are shown below:

PSR Space sqft H. K. LaborHrs Salary Dollars

General Administration $10,000 $2,000 $1,500,000
Facilities $20,000 $5,000 $3,000,000
Financial Services $15,000 $3,000 $2,000,000
Total $45,000 $10,000 $6,500,000

Patient Services

Routine Care $40,000,000 $400,000 $150,000 $22,000,000
Intensive Care $4,000,000 $40,000 $30,000 $5,000,000
Diagnostic Services $6,000,000 $60,000 $15,000 $6,000,000
Other Services $10,000,000 $100,000 $25,000 $7,000,000
Total $60,000,000 $600,000 $220,000 $40,000,000
Grand Total $60,000,000 $645,000 $230,000 $46,500,000

#1). Use the information for St. Anthony's. Use the direct method of cost allocation.
Assume that $5,000,000 of financial services costs is related to billing and managerial reporting and $2,000,000 is related to payroll and personnel management activities. What is the allocation rate for the Financial Services cost pool allocated based on patient services revenues?

Hint: Find the most appropriate cost driver. The $5,000,000 of the Financial Services cost is related to 'Billing and Managerial Reporting.' The cost driver will be Total Patient Services Revenue.

Allocation Rate for Financial Services= $0.83

#2). Use the information for St. Anthony's. Use the direct method of cost allocation.
Assume that $5,000,000 of financial services costs is related to billing and managerial reporting and $2,000,000 is related to payroll and personnel management activities. What is the allocation rate for the Financial Services cost pool allocated based on salary dollars?

Hint: Find the most appropriate cost driver. The 'Payroll and Personnel Management Activities' cost of $2,000,000 is directly related to salary dollars. This means the cost driver should be the total salary dollars for providing patient care.

Allocation Rate for Financial Services per Salary Dollars= $0.05 per salary dollar

#3). Use the information for St. Anthony's. Use the direct method of cost allocation.
Assume that $5,000,000 of financial services costs is related to billing and managerial reporting and $2,000,000 is related to payroll and personnel management activities. How much of the $5,000,000 financial services cost pool is allocated to Intensive Care?

Hint: Use the cost driver you calculated for 'Financial Services- Billing and Managerial Reporting' (problem #1) and then multiple that by the Patient Service Revenue for Intensive Care. Create a table it will help.

Allocation Rate to Intensive Care= $3,320,000

#4). Use the information for St. Anthony's. Use the direct method of cost allocation.
Assume that $5,000,000 of financial services costs is related to billing and managerial reporting and $2,000,000 is related to payroll and personnel management activities. How much of the $2,000,000 financial services cost pool is allocated to Diagnostic Services?

Hint: Use the cost driver you calculated for 'Payroll and Personnel Management (problem #2) and then multiple that by the Salary for Diagnostic Services. Create a table it will help.

Allocation to Diagnostic Services= $300,000

#5). Use the information for St. Anthony's. Use the direct method of cost allocation.
Assume that the hospital uses salary dollars as the cost driver for general
administration and housekeeping labor hours as the cost driver for facilities.
Assume that $5,000,000 of financial services costs is related to billing and managerial reporting and $2,000,000 is related to payroll and personnel management activities. What is the total indirect costs allocated to Routine Services?

Hint: You have already figured out the two Financial Service Allocation Rates - all we have to do is to calculate the rates for General Administration and Facilities and then apply the rates to the Patient Services Departments. Do one step at a time and create a table.

#6). Use the information for St. Anthony's. Use the direct method of cost allocation.
Assume that the hospital uses salary dollars as the cost driver for general administration and housekeeping labor hours as the cost driver for facilities. Assume that $5,000,000 of financial services costs is related to billing and managerial reporting and $2,000,000 is related to payroll and personnel management activities. What is the total indirect costs allocated to Other Services?

Hint: You have already figured out the two Financial Service Allocation Rates - all we have to do is to calculate the rates for General Administration and Facilities and then apply the rates to the Patient Services Departments.
Do one step at a time and create a table.

pur-new-sol

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