Question

Clinic uses the direct method to allocate service department costs to operating departments. The clinic has two service departments, Personnel and Support, and two operating departments, Prenatal and Pediatrics. Service Departments Operating Department Personnel Support Prenatal Pediatrics Departmental costs $ 23,724 $ 44,400 $ 109,770 $ 298,910 Employee hours 5,000 1,000 25,000 20,000 Space occupied 3,000 2,000 35,000 7,000 Personnel Department costs are allocated on the basis of employee hours and Support Department costs are allocated on the basis of space occupied in square feet. The total Pediatrics Department cost after the allocations of service department costs is closest to

Answer 1

The total Pediatrics Department cost after the allocations of service department costs is closest to $316,869.

Total Pediatrics Department cost

Employee Hours:

Total Allocation Percentage = 20,000/(25,000+20,000)

Total Allocation Percentage = 20,000/45,000

Total Allocation Percentage =0.44

Allocated cost for personnel = .44× $ 23,724

Allocated cost for personnel  =10,544

Space Occupied:

Total Allocation Percentage = 7,000/(35,000+7,000)

Total Allocation Percentage = 7,000/42,000

Total Allocation Percentage = 0.167

Allocated cost for personnel =0.167×$44,400

Allocated cost for personnel =7415

Total Cost:

Total cost=$298,910+$ 10,544 +$ 7415

Total cost= $316,869

Inconclusion the total Pediatrics Department cost after the allocations of service department costs is closest to $316,869.

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