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6.7 Assume that the hospital uses the direct method for cost allocation. Furthermore, the cost driver for general administration is patient services revenue, the cost drive for maintenance is space utilization and the cost drive for employee benefits is the number of full-time equivalent employees.

A. What are the appropriate allocation rates?

B. Use the allocation table similar to Exhibit 6.7 to allocate the hospital's overhead costs to the patient services departments.

St. Luke's Hospital has three support departments and four patient services departments. The direct costs to each of the support departments are as follows: The following data pertain to problems 6.7 and 6.8: General Administration $4,000,000 Maintenance 5,000,000 Employee Benefits 4,000,000 Selected data for the three support and four patient services departments are shown below: GSMETIC sool Number of Patient Services Revenue Space (square feet) Full-Time Equivalent Employees Salary Dollars Tobben 8,000 15 2,500,000 Department Support: General Administration Maintenance Employee Benefits Total ora 10,000 7,000 25,000 75 eo 3,500,000 50 HIT 3,000,000 140 s $ 9,000,000 Patient Services: Routine Care Intensive Care Obstetrics Services $40,000,000 500,000 700 7,000,000 45,000 200 4,000,000 35,000 150 400 400 $63,000,000 780,000 1,450 $63,000,000 805,000 $18,000,000 6,000,000 ab 4,000,000 8,000,000 $36,000,000 $45,000,000 Other Services 12,000,000 200,000 Total Grand Total 1,590

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