Direct method or stop-down method for cost allocation

Reference no: EM1310193

1) Now suppose that hospital utilizes step-down method for cost allocation, with salary dollar as cost driver for general administration, housekeeping labour hours as cost driver for facilities, and patient services revenue as cost driver for financial services. Suppose also that general administration department gives the most services to other support departments, followed closely by facilities department. Financial services department gives the least services to other support departments.

a) Use the allocation table to assign hospital’s overhead costs to patient services departments.

b) Is direct method or stop-down method better for cost allocation within St. Benedict’s? Describe your answer.

Reference no: EM1310193

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