Managerial Accounting: Creating Value in a Dynamic Business Environment
12th Edition
ISBN: 9781260417074
Author: HILTON, Ronald
Publisher: MCGRAW-HILL HIGHER EDUCATION
expand_more
expand_more
format_list_bulleted
Concept explainers
Videos
Textbook Question
Chapter 12, Problem 43P
Refer to the organization chart for Rocky Mountain General Hospital given in the preceding problem. Ignore the rest of the data in that problem. The following table shows the cost allocation bases used to distribute various costs among the hospital’s divisions.
Shown below are the amounts of each cost allocation base associated with each division.
Required:
- 1. Prepare a table similar to Exhibit 12–5 that distributes each of the costs listed in the preceding table to the hospital’s divisions.
- 2. Comment on the appropriateness of patient billings as the basis for distributing community outreach costs to the hospital’s divisions. Can you suggest a better allocation base?
- 3. Is there any use in allocating utilities costs to the divisions? What purposes could such an allocation process serve?
- 4. Build a spreadsheet: Construct an Excel spreadsheet to solve requirement (1) above. Show how the solution will change if the following information changes: the costs incurred were $200,000, $25,000, $200,000, and $50,000, for facilities, utilities, general administration, and community outreach, respectively.
Expert Solution & Answer
Trending nowThis is a popular solution!
Students have asked these similar questions
Refer to Exhibit 3–12, which portrays the three types of allocation procedures used in two-stage allocation. Give an example of each of these allocation procedures in a hospital setting. The ultimate cost object is a patient-day of hospital care. This is one day of care for one patient. (Hint: First think about the various departments in a hospital. Which departments deal directly with patients; which ones are service departments and do not deal directly with patients? What kinds of costs does a hospital incur that should be distributed among all of the hospital’s departments? Correct hospital terminology is not important here. Focus on the concepts of cost allocation portrayed in Exhibit 3–12.)
Unk
The costs of the Accounting Department at Central Hospital would be considered by the Surgery
Department to be:
A. a) direct costs.
B. b) indirect costs.
C. c) incremental costs.
D. d) opportunity costs.
E. e) sunk costs.
Standard costs are divided into which of the following components?
A. price standard and quantity standard
B. quality standard and quantity standard
C. variance standard and quantity standard
D. materials standard and labor standard
Which of the following activity bases would be the most appropriate for food costs of a hospital?
A. how many MRI's are taken
B. number of patients who stay in the hospital
C. quantity of prescriptions filled
D. number of nurses scheduled to work
To calculate income from operations, total service department charges are
A. subtracted from operating expenses
B. subtracted from income from operations before service department charges
C. subtracted from gross profit margin
D. added to income from operations before service department charges
Chapter 12 Solutions
Managerial Accounting: Creating Value in a Dynamic Business Environment
Ch. 12 - Why is goal congruence important to an...Ch. 12 - Define and give examples of the following terms:...Ch. 12 - Prob. 3RQCh. 12 - Explain the relationship between performance...Ch. 12 - Prob. 5RQCh. 12 - What is the key feature of activity-based...Ch. 12 - Prob. 7RQCh. 12 - Define and give examples of the following terms:...Ch. 12 - Give an example of a common resource in an...Ch. 12 - Explain how and why cost allocation might be used...
Ch. 12 - Define the term cost allocation base. What would...Ch. 12 - Referring to Exhibit 125, why are marketing costs...Ch. 12 - Prob. 13RQCh. 12 - Why do some managers and accountants choose not to...Ch. 12 - Why is it important in responsibility accounting...Ch. 12 - Prob. 16RQCh. 12 - Prob. 17RQCh. 12 - Prob. 18RQCh. 12 - Prob. 19RQCh. 12 - Prob. 21RQCh. 12 - Prob. 22RQCh. 12 - Prob. 23RQCh. 12 - Define the term manufacturing cycle efficiency.Ch. 12 - Prob. 25RQCh. 12 - What is meant by aggregate productivity, and what...Ch. 12 - For each of the following organizational subunits,...Ch. 12 - Prob. 28ECh. 12 - Prob. 29ECh. 12 - The following data pertain to the Waikiki Sands...Ch. 12 - Lackawanna Community College has three divisions:...Ch. 12 - Countywide Cable Services, Inc. is organized with...Ch. 12 - Prob. 36ECh. 12 - Prob. 37ECh. 12 - Prob. 38ECh. 12 - Prob. 39PCh. 12 - Prob. 40PCh. 12 - Prob. 41PCh. 12 - Rocky Mountain General Hospital serves three...Ch. 12 - Refer to the organization chart for Rocky Mountain...Ch. 12 - Prob. 44PCh. 12 - Buckeye Department Stores, Inc. operates a chain...Ch. 12 - Building Services, Co. (BSC) was started a number...Ch. 12 - Warriner Equipment Company, which is located in...Ch. 12 - Prob. 49PCh. 12 - MedTech, Inc. manufactures diagnostic testing...Ch. 12 - Prob. 51PCh. 12 - Cathys Classic Clothes is a retailer that sells to...Ch. 12 - Pacific Rim Industries is a diversified company...
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Zamboanga Hospital plans to use the activity-based costing to assign hospital indirect costs to the care of patients. The hospital has identified the following activities and activity rates for the hospital indirect costs: (Refer to image) Determine the activity cost associated with Patient 2. a. P1,388 b. P 908 c. P1,816 d. P4,555arrow_forwardRank the support departments based on the percentage of their services provided to other support departments. Use this ranking to allocate the support departments’ costs to the operating departments based on the step-down method.arrow_forwardProjected Revenues by Patient Services Department Routine Care Laboratory Radiology Assume that the hospital uses the direct method for cost allocation. Furthermore, the cost driver for general administration and financial services is patient services revenue, while the cost driver for facilities is space utilization. a. What are the appropriate allocation rates? b. Use an allocation table similar to Exhibit 6.7 to allocate the hospital's overhead costs to the patient services departments. Total revenues Projected Costs for All Departments Patient Services Departments (Direct Costs): Routine Care Laboratory Radiology Total costs Support Services Departments (Overhead Costs): Financial Services Facilities Housekeeping General Administration Human Resources Total overhead costs Total costs of both patient and support services Projected profit EXHIBIT 6.7 Kensington Hospital: Final Allocations Support Department (allocation rate) Financial Services ($0.05556) Facilities Housekeeping…arrow_forward
- Required: Rank the support departments based on the percentage of their services provided to other support departments. Use this ranking to allocate the support departments’ costs to the operating departments based on the step-down method.arrow_forwardWhich of the following will give you the most accurate allocation between a cost's fixed component and variable component? a. Examination of a students’ registration forms for miscellaneous fees and tuition fees b. Use of the least squares method to allocate the cost of electricity c. Dividing the total cost on the water bill among the different departments based on direct labor hours d. Dividing the total cost of the postpaid plan using the high-low methodarrow_forwardQuestion 1. The Rye Village Clinic provides primary health care to local residents. For costing purposes, the clinic classifies its departments into three operating departments (Clinic, Radiology, and Laboratory) and three support departments (Administration, Housekeeping, and Medical Records). The allocation of Administration costs is based on the percentage of time spent in the department. The allocation of Housekeeping costs is based on floor space. The allocation of Medical Records cost is based on the number of entries to patient files. For the first week of May, the department managers report the following data: House- Medical Admin. keeping Records Clinic Radiology Lab. Total Total costs 250 50 200 800 500 400 2,200 Time spent [percentage] 10 10 20 30 20 10 100 Floor space [square feet) 3,000 2,000 14,000 1,000 500 2,500 5,000 Entries to patient files 500 1,500 4,500 500 2,000 Required: (a) Allocate the three support department costs to the three operating departments using the…arrow_forward
- Lackawanna Community College has three divisions: Liberal Arts, Sciences, and Business Administration. The college's comptroller is trying to decide how to allocate the costs of the Admissions Department, the Registrar's Department, and the Computer Services Department. The comptroller has compiled the following data for the year just ended. Department Annual Cost Admissions $ 118,000 Registrar 197,000 Computer Services 420, 000 Division Budgeted Enrollment Budgeted Credit Hours Planned Courses Requiring Computer Work Liberal Arts 1,100 31,000 12 Sciences 850 28,750 25 Business Administration 750 22,750 25 Required: 1. Distribute the departmental costs to the college's three divisions based on the allocation base given. 2. Choose the better allocation base for distributing the cost to the following departments:Recuired: Dustroule the depurtmerital costs to the collegels three dwaish based on the allocation bus ghen Chose the betier aliscation base for distr buting the cost to the…arrow_forwardWhat are the differences between single and dual rate allocation? Explain with suitable examples. b) Provide a numerical example for single rate allocation and dual rate allocation and explain the process of allocating support department costs to the operating department, assuming that: The company has two support departments “S1 & S2” and two operating departments “O1 & O2.” The company use the direct method to allocate support department costs. Note: You are required to provide numerical examples assuming the values of your own and they should not be copied from any sources.arrow_forwardIdentifying Direct and Indirect Costs Northwest Hospital is a full-service hospital that provides everything from major surgery and emergency room care to outpatient clinics. Required: For each cost incurred at Northwest Hospital, indicate whether it would most likely be a direct cost or an indirect cost of the specified cost object by placing anarrow_forward
- Discuss two different criteria Mr. Smith can use to determine the sequence for allocating support department costs using the step-down method.arrow_forwardNorthwest Hospital is a full-service hospital that provides everything from major surgery and emergency room care to outpatient clinics.Required:For each cost incurred at Northwest Hospital, indicate whether it would most likely be a direct cost or an indirect cost of the specified cost object by placing an X in the appropriate column.arrow_forwardDirect Method Seattle Western University has provided the following data to be used in its service department cost allocations: Required: Using the direct method, allocate the costs of the service departments to the two operating departments. Allocate the Administration cost on the basis of student credit-hours and the Facility Services cost on the basis of space occupied.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Managerial AccountingAccountingISBN:9781337912020Author:Carl Warren, Ph.d. Cma William B. TaylerPublisher:South-Western College Pub
Financial And Managerial AccountingAccountingISBN:9781337902663Author:WARREN, Carl S.Publisher:Cengage Learning,
Managerial Accounting
Accounting
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:South-Western College Pub
Financial And Managerial Accounting
Accounting
ISBN:9781337902663
Author:WARREN, Carl S.
Publisher:Cengage Learning,
Cost Accounting - Definition, Purpose, Types, How it Works?; Author: WallStreetMojo;https://www.youtube.com/watch?v=AwrwUf8vYEY;License: Standard YouTube License, CC-BY