A Community Hospital has two (2) service departments: Maintenance and Food Services. The hospital has three (3) patient care units, namely: General Medicine, OB, and Surgery. Additional information are as follows: Amount of cost to be allocated: MaintenanceP 8,000,000Food ServicesP 3,000,000 Allocation method:Maintenance Costs are allocated based on square foot assigned to theFood Service Costs are allocated based on number of meals served to the EXPECTED UTILIZATION RATES SQ. FT.Meals ServedFood Services10,00030,000Maintenance10,00010,000Surgery20,00040,000OB30,00030,000General Medicine30,00090,000TOTAL100,000200,000 Using the information, allocate the costs of the two (2) service departments with the three (3) patient care units using: Direct Method, Step Method – Maintenance First, Step Method – Food Services First, and Reciprocal Method.

Cost allocation is a method of delivering assistance to the cost centres of a joint service…

Answered: A Community Hospital has two (2)…

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter4: Activity-based Costing

Section: Chapter Questions

Problem 5MAD

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A Community Hospital has two (2) service departments: Maintenance and Food Services. The hospital has three (3) patient care units, namely: General Medicine, OB, and Surgery.

Additional information are as follows:

Amount of cost to be allocated:

Maintenance	P 8,000,000
Food Services	P 3,000,000

Allocation method:
1. Maintenance Costs are allocated based on square foot assigned to the
2. Food Service Costs are allocated based on number of meals served to the

*EXPECTED UTILIZATION RATES*
	SQ. FT.	Meals Served
Food Services	10,000	30,000
Maintenance	10,000	10,000
Surgery	20,000	40,000
OB	30,000	30,000
General Medicine	30,000	90,000
TOTAL	100,000	200,000

Using the information, allocate the costs of the two (2) service departments with the three (3) patient care units using: Direct Method, Step Method – Maintenance First, Step Method – Food Services First, and Reciprocal Method.

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