What is the allocation rate

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Question - Albany Clinic has 2 support departments and three patient services departments. The direct cost of each of the support departments are as follows:

Administration $2,500,000

Maintenance 1,200,000

These costs must be allocated to Albany Clinic's 3 revenue producing departments. Two cost drivers are under consideration: patient services revenue and square footage. Selected data for the 3 patient services departments are as follows:

Patient Services Department

Patient Revenue

Space (square feet)

Routine Care

$25,000,000

500,000

Intensive Care

$11,000,000

35,000

Ambulatory Care

$1,500,000

175,000

Total for Revenue depts

$37,500,000

710,000

Assume the Clinic uses the direct method for cost allocation.

1. What is the cost pool?

2. What is the allocation rate if: (1) patient service revenue is used as the cost driver; (2) square footage is used as the cost driver?

3. What is the dollar allocation to each patient services department if patient services revenue is used as the cost driver?

4. What is the dollar allocation to each patient services department if square footage is used as the cost driver?

Reference no: EM133155408

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