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5.4. Assume that the hospital uses salary dollars as the cost driver
for general administration, housekeeping labor hours as the cost
driver for facilities, and patient services revenue as the cost driver
for financial services. (The majority of the costs of the facilities
department stem from the provision of housekeeping services.)
a. What are the appropriate allocation rates?
b. Use an allocation table similar to the one used for problem 6.3
to allocate the hospital's overhead costs to the patient services
departments.
c. Compare the dollar allocations with those obtained in problem
6.3. Which departments are allocated more overhead costs?
Which are allocated less?
d. Which of the two cost driver schemes is better? Explain your
answer.