Devise and implement a cost allocation scheme


Task:

Assume that $2 mil of Financial Services are related to billing and managerial reporting and $1 mil are related to payroll and personnel management activities.

Q1. Devise and implement a cost allocation scheme that recognizes that Financial Services has two widely different functions?

Q2. Is there any additional information that would be helpful in completing part a?

Q3. What are the costs and benefits to St Mary's of creating two cost pools for Financial Services?

Department                            Space              Housekeeping             Salary

Support:                                    (sq ft)              Labor hours               Dollars                        

 

General                                     10000                   2000                     1,500,000

Admin

 

Facilities                                     20,000                  5,000                    3,000,000                   

Financial Services                        15,000                  3,000                     2,000,000

                                               -----------------------------------------------------------

Total                                           45,000                  10,000                    6,500,000

 

Patient Services:

 

Routine Care               30,000,000      400,000           150,000                       12,000,000

 

Intensive Care             4,000,000        40,000             30,000                         5,000,000       

 

Diagnostic Services       6,000,000       60,000             15,000                         6,000,000                   

Other Services             10,000,000      100,000           25,000                         7,000,000

                                    ---------------------------------------------------------------------------------

Total                            50,000,000      600,000           220,000                       30,000,000

                                    ---------------------------------------------------------------------------------

                                    ---------------------------------------------------------------------------------

Grand Total                   50,000,000      645,000           230,000                       36,500,000                             

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Finance Basics: Devise and implement a cost allocation scheme
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