Management of Seattle Community Hospital has decided to allocate its three support departments (administration, public relations, and maintenance) to its three operating departments (surgery, in-patient, and out-patient). Budgeted information for the year follows: Direct costs administration $5,400,000 public relations 1,100,000 maintenace and janitorial 1,700,000 Surgery 9,000,000 In-patient 12,000,000 outpatient services 8,000,000 allocation Bases Administration Dollars of assets employed public relations Number of employees maintnance and Janitorial Hours of equipment operation Expected Utilizations Assets Employed Number of Employees Hours of Equipment Operation Administration $1,500,000 20 2,000 Public Relations 900,000 10 1,000 Maintenance and Janitorial 1,600,000 75 3,000 Surgery 4,000,000 20 25,000 In-patient care 2,500,000 40 30,000 Out-patient 1,000,000 50 14,000 Question 1 What is the total dollar amount of the operating (revenue-producing) departments after allocation, using the Step-Down Method? What total amount of administration gets allocated to In-patient care using the Step-Down Method (directly and indirectly)? How much total costs are allocated to the Out-patient Services, using the Direct Mehod? What amount of total non-revenue producing costs are allocated to Surgery, using the Step-down Method?
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
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A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
Management of Seattle Community Hospital has decided to allocate its three support departments (administration, public relations, and maintenance) to its three operating departments (surgery, in-patient, and out-patient). Budgeted information for the year follows:
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Direct costs |
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administration |
$5,400,000 |
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public relations |
1,100,000 |
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maintenace and janitorial |
1,700,000 |
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Surgery |
9,000,000 |
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In-patient |
12,000,000 |
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outpatient services |
8,000,000 |
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allocation Bases |
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Administration |
Dollars of assets employed |
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public relations |
Number of employees |
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maintnance and Janitorial |
Hours of equipment operation |
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Expected Utilizations |
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Assets Employed |
Number of Employees |
Hours of Equipment Operation |
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|
Administration |
$1,500,000 |
20 |
2,000 |
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Public Relations |
900,000 |
10 |
1,000 |
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Maintenance and Janitorial |
1,600,000 |
75 |
3,000 |
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Surgery |
4,000,000 |
20 |
25,000 |
|
In-patient care |
2,500,000 |
40 |
30,000 |
|
Out-patient |
1,000,000 |
50 |
14,000 |
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Question 1 |
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