# Hospital Cost Allocation And Cost Drivers

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Running Head: HOSPITAL COST ALLOCATION 1 Hospital Cost Allocation and Cost Drivers: St. Benedict’s Case Study Student’s Name Professor Course Date ST. BENEDICT’S HOSPITAL CASE STUDY 2 St. Benedict’s Hospital Case Study Problem 6.3 and 6.4 Given the data given in the problem 6.3 and 6.4 case study in the textbook, the following calculations are made concerning St. Benedict’s Hospital’s three support departments and four patient services departments (Gapenski, & Reiter, 2008). 6.3 Assume that the hospital uses the direct method for cost allocation. Furthermore, the cost driver for general administration and financial services is patient services revenue, while the cost driver for facilities is space utilization. a. What are the appropriate allocation rates? 6.3. Appropriate allocation rate for general administration will be 0.04 as shown below Cost pool/cost drive= 2000000/50000000 Facilities Allocation rate= 50000000/600000 =8.33333 Financial services Allocation Rate=3000000/50000000 =0.06 Revenue Allocation Rate(0.04) facility allocation rate (8.33333) Financial Service Allocation rate(0.06) 30000000 1200000 400000 4000000 160000 40000 6000000 240000 60000 3333333.32 30000000 1800000 333333.332 4000000 240000 499999.998 6000000 360000 10000000 400000 100000 833333.33 4999999.98 10000000 50000000 600000 3000000 b. Use an allocation table similar to Exhibit 6.7 to allocate the hospital's overhead costs to the patient services departments. Allocation T ...
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