Solution-Allocate the costs of the two support departments

Allocate the costs of the two support departments

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Reference no: EM132515197

Suva Private Hospital has two support departments, Customer services department and housekeeping department and two revenue-producing departments, outpatient department (O) and maternity department (M). The controller for the hospital has decided to use the reciprocal method to allocate the costs of the support departments to the revenue-producing departments. She has prepared the following cost equations for the two support departments. C equals the total cost for the customer services department, and H equals the total cost for the housekeeping department.

C = $35,000 + 0.3H

H = $40,000 + 0.2C

Before the controller was able to complete the allocation, she had to leave to take care of an emergency. In addition to these equations, she left a hastily scribbled note indicating that Outpatient department uses 40 percent of customer service's output and 20 percent of housekeeping's output.

REQUIRED

Question 1. Using the reciprocal method calculate the values for departments C and H

Question 2. Allocate the costs of the two support departments to each of the two producing departments.

Reference no: EM132515197

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Allocate the costs of the two support departments

Reference no: EM132515197

Reference no: EM132515197

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