Question

The housekeeping services department of ruger clinic, a multispecialty practice in toledo, ohio, had $100,000 in direct costs during 2015. these costs must be allocated to ruger's three revenue-producing patient services departments using the direct method. two cost drivers are under consideration: patient services revenue and hours of housekeeping services used. the patient services departments generated $5 million in total revenues during

Answer 1

Missing word "2015, and to support these clinical activities, they used 5,000 hours of housekeeping services. a.What is the value of the cost pool? b.What is the allocation rate if patient services revenue is used as the cost driver? and hours of housekeeping services issued as the cost driver?"

a. What is the value of the cost pool?

The cost pool = $100,000 (All the indirect cost)

b. What is the allocation rate if patient services revenue is used as the cost driver?

The allocation rate = Value for housekeeping / Total Revenue

The allocation rate = $100,000 / 5,000,000

The allocation rate = $0.02 per patient service

c. What is the allocation rate if hours of housekeeping services is issued as the cost driver?

Allocation rate = Value for housekeeping / Hours of housekeeping service

Allocation rate = $100,000 / 5000 hours

Allocation rate = $20 per housekeeping hour