Yellville 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 areas using the step method. Allocate the service department with the largest dollar value first.
Yellville 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 areas using the step method. Allocate the service department with the largest dollar value first.
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