Question description
Community Recovery Clinic offers two
types of services: inpatient and outpatient. They have two types of service
departments: administration and housekeeping. Direct costs of nursing care and
supplies can be traced directly to the patient.
Number
of Square
Departments Employees Footage
Inpatient 40 20.000
Outpatient 20 10,000
Administration 10 5,000
Housekeeping 5 5,000
Overhead
costs for each department are as follows:
Administration $500,000
Housekeeping $200,000
Administration
is allocated based on number of employees and housekeeping is based on square
footage. Carry out calculations to four decimal places.
Required:
Allocate
service department costs using the direct method.
Allocate
service department costs using the reciprocal method.
What
is the other method of allocation?
Briefly
discuss the pros and cons of each method and select the best one.
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Solution:
Solution:
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