The housekeeping services department of Ruger Clinic, a multi-specialty practice in Toledo, Ohio had $100,000 in direct costs during 2011. These costs must be allocated to Ruger's three revenue-producing patient services 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 2011, and to support these clinical activities, they used 5,000 hours of housekeeping services.
- What is the value of the cost pool?
- What is the allocation rate if:
- Patient services revenue is used as the cost driver?
- House of housekeeping services is used as the cost driver?