Reference no: EM133153196

Question - Wellspring Clinic has two patient services departments: Medicine and Surgery. The patient services departments are supported by the Housekeeping, Financial Services, and Administration departments. The Administration Department of Wellspring Clinic has compiled the following information:

Department	Direct Costs	Square Feet	No. of Employees
Housekeeping	$ 200,000	3,000	250
Administration	$ 400,000	5,000	500
Financial Services	$ 300,000	2,000	100
Medicine	$1,000,000	53,000	2,600
Surgery	$1,500,000	40,000	2,300

Wellspring has determined that the cost driver for housekeeping is square feet and that the cost driver for Administration and Financial Services is the number of employees.

Required -

A) Using the direct method of cost allocation, what is the approximate allocation rate for housekeeping costs (round to the nearest cent) Answer your question with explanation.

B) Using the step-down method of cost allocation, Calculate the approximate allocation rate for housekeeping costs (round to the nearest cent). Assume Housekeeping's costs are allocated first, followed by Administration's and then by Financial Services. Answer your question with a proper explanation.