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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?

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?

Cornerstones of Cost Management (Cornerstones Series)
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter7: Allocating Costs Of Support Departments And Joint Products
Section: Chapter Questions
Problem 30E: A company uses charging rates to allocate service department costs to the using departments. The...
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  • 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

 

  1. What is the value of the cost pool?
  2. Which of the two cost drivers is better? Patient service revenue or housekeeping hours?  Why?
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