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Fianance for healthcare Essay

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With this project the students have ample opportunity to be creative in their solution approaches. It is impossible to provide a single solution to apply to every student’s work. The information below provides the basic concepts for the questions instructed to be included in the paper. These answers are merely a starting point; the student’s work should be graded on thought processes, critical thinking skills, assumptions used, creativity, and the ability to express ideas coherently from the resulting numerical answers on the spreadsheet. 4. Your paper should include: a. Explain why allocation methods are used. Inherently, in all businesses there is overhead costs or non-direct costs. If management wants to know the true cost …show more content…

Then the department is closed, and the process steps down to the support department that provides the next highest amount of services to other support departments. Because support departments are closed out in each step, there is no opportunity to allocate support costs back to the departments that have already closed. Thus, this method is not as complex as the remaining two to implement in practice, but it is superior conceptually to the direct method. The double apportionment method first allocates each support department to all other departments, so each support department receives an allocation from all other support departments. After the initial allocation (the first apportionment), the step-down method is used to allocate the costs that remain in the support departments after the first apportionment, which for all support departments consists of direct costs and allocations from other support departments. This method better recognizes intra-support department relationships than do the first two, but it adds complexity c. Which allocation method is best? Conceptually, double apportionment method is the best of the three methods used, followed by the step-down method and, finally, the direct method. Although the direct method is conceptually the weakest, it is the easiest and least costly to implement. As in most situations, greater accuracy comes at a cost—the greater the accuracy of the allocation method, the greater the implementation

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