P4B-5
Step-Down Method [LO11]
P4B-5
Pleasant View Hospital has three service departments—Food Services,
Administrative Services, and
X-ray Services. The costs of these departments are allocated by the step-down
method, using the
allocation bases and in the order shown below:
Costs
Incurred
Base for Allocation
Food Services . . . . . . . . . .
. . . Variable Meals served
Fixed Peak-period needs
Administrative Services . . . . .
. Variable Files processed
Fixed 10% X-ray Services, 20%
Outpatient Clinic,
30% OB Care, and 40% General
Hospital
X-ray Services . . . . . . . . .
. . . . Variable X-rays taken
Fixed Peak-period needs
Estimated
cost and operating data for all departments in the hospital for the forthcoming
month are presented
in the following table:
|
|
Food
Services
|
Admin.
Services
|
X-Ray
Services
|
Outpatient
Clinic
|
OB Care
|
General
Hospital
|
Total
|
|
Variable
costs
|
$
73,150
|
$
6,800
|
$38,100
|
$11,700
|
$
14,850
|
$
53,400
|
$198,000
|
|
Fixed
costs
|
48,000
|
33,040
|
59,520
|
26,958
|
99,738
|
344,744
|
612,000
|
|
Total
costs
|
$121,150
|
$39,840
|
$97,620
|
$38,658
|
$114,588
|
$398,144
|
$810,000
|
|
Meals
served
|
|
1,000
|
500
|
|
7,000
|
30,000
|
38,500
|
|
Percent
of peak-period Food Services needs
|
|
2%
|
1%
|
|
17%
|
80%
|
100%
|
|
Files
processed
|
|
|
1,500
|
3,000
|
900
|
12,000
|
17,400
|
|
X-rays
taken
|
|
|
|
1,200
|
350
|
8,400
|
9,950
|
|
Percent
of peak-period X-ray Services needs
|
|
|
|
13%
|
3%
|
84%
|
100%
|
All
billing in the hospital is done through the Outpatient Clinic, OB Care, or
General Hospital. The hospital’s
administrator wants the costs of the three service departments allocated to
these three billing centers.
Required:
Prepare
the cost allocation desired by the hospital administrator. Include under each
billing center the direct costs of the center as well as the costs allocated
from the service departments.
File name: P4B-5 Pleasant View.xls File type: xls PRICE: $12
