The housekeeping services department of RC, a multispecialty practice in Toledo, Ohio had $100,000 in direct cost during 2012. These costs must be allocated to Rugers three revenue producing patient service departments using the direct method. Two cost drivers are under consideration: patient services revenue and hours of housekeeping services used. The patient services departments generated $5 million in total revenues during 2012. To support these clinical activities, the departments used 5,000 hours of housekeeping services.
a. What is the value of the cost pool?
b. What is the allocation rate if (1) patient service revenue is used as the cost driver and (2) hours of housekeeping services are used as the cost driver?