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CASE 4						Copyright 2006
						by FACHE
	WESTSIDE GROUP PRACTICE
	Cost Allocation Methods
INPUT DATA:				KEY OUTPUT:
Revenues:				Profit and Loss Statements:
				PART 3 ( INSERT INFORMATON FROM INPUT DATA AND PARTS 1 AND 2)
Adult Medicine		$ 12,000,000		Direct Method:
Obstetrics		6,000,000				A. Medicine	Obstetrics	Pediatrics	Aggregate
Pediatrics		2,000,000		Revenues		$ 12,000,000	$ 6,000,000	$ 2,000,000	$ 20,000,000
Total revenues		$ 20,000,000		Direct costs		$ 6,000,000	$ 3,600,000	$ 1,200,000	$ 10,800,000
				Indirect costs		-	-	-	-
Direct Costs:				Total costs		$ 6,000,000	$ 3,600,000	$ 1,200,000	$ 10,800,000
				Pre-tax profit		$ 6,000,000	$ 2,400,000	$ 800,000	$ 9,200,000
Patient Services Departments:
Adult Medicine		$ 6,000,000		Step-Down Method:
Obstetrics		3,600,000				A. Medicine	Obstetrics	Pediatrics	Aggregate
Pediatrics		1,200,000		Revenues
Subtotal		$ 10,800,000		Direct costs
Support Departments:				Indirect costs		-	-	-	-
Administration		1,000,000		Total costs		$ -	$ -	$ -	$ -
Facilities		4,400,000		Pre-tax profit		$ -	$ -	$ -	$ -
Finance		1,800,000
Subtotal		$ 7,200,000		Double Apportionment Method:			REVIEW PURPOSES ONLY
Total costs		$ 18,000,000				A. Medicine	Obstetrics	Pediatrics	Aggregate
				Revenues		$ 12,000,000	$ 6,000,000	$ 2,000,000	$ 20,000,000
Allocation Matrix:				Direct costs		$ 6,000,000	$ 3,600,000	$ 1,200,000	$ 10,800,000
				Indirect costs		4,236,594	1,340,336	1,623,070	7,200,000
Services	Percentage of Services Provided by			Total costs		$ 10,236,594	$ 4,940,336	$ 2,823,070	$ 18,000,000
Provided to	Administration	Facilities	Finance	Pre-tax profit		$ 1,763,406	$ 1,059,664	$ (823,070)	$ 2,000,000
Administration		5%	5%	Reciprocal Method:			REVIEW PURPOSES ONLY
Facilities	10%		5%			A. Medicine	Obstetrics	Pediatrics	Aggregate
Finance	10%	10%		Revenues		$ 12,000,000	$ 6,000,000	$ 2,000,000	$ 20,000,000
Adult Medicine	35%	55%	50%	Direct costs		$ 6,000,000	$ 3,600,000	$ 1,200,000	$ 10,800,000
Obstetrics	20%	10%	25%	Indirect costs		4,234,315	1,336,297	1,629,388	7,200,000
Pediatriacs	25%	20%	15%	Total costs		$ 10,234,315	$ 4,936,297	$ 2,829,388	$ 18,000,000
Total	100%	100%	100%	Pre-tax profit		$ 1,765,685	$ 1,063,703	$ (829,388)	$ 2,000,000

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