Problem
Wellspring Clinic has two patient services departments: Medicine and Surgery. The patient services departments are supported by the Housekeeping, Financial Services, and Administration departments. The Administration Department of Wellspring Clinic has compiled the following information:
|
Department
|
Direct Costs
|
Square Feet
|
No. of Employees
|
|
Housekeeping
|
$ 200,000
|
3,000
|
250
|
|
Administration
|
$ 400,000
|
5,000
|
500
|
|
Financial Services
|
$ 300,000
|
2,000
|
100
|
|
Medicine
|
$1,000,000
|
53,000
|
2,600
|
|
Surgery
|
$1,500,000
|
40,000
|
2,300
|
Wellspring has determined that the cost driver for housekeeping is square feet and that the cost driver for Administration and Financial Services is the number of employees. Using the step-down method of cost allocation, what is the approximate allocation rate for housekeeping costs (round to the nearest cent)? Assume Housekeeping's costs are allocated first, followed by Administration's and then by Financial Services'.