# help with ABC approach

Anonymous

Question description

Analyze the following scenario: Jump Hospital currently allocates all maintenance department costs based on departmental square feet. However, the manager of the pharmacy department has
suggested that an ABC approach be used for the portion of the maintenance department costs that relate to repairing equipment. Her contention is that the pharmacy has relatively little equipment that breaks. However, it must subsidize many high-tech departments that require expensive equipment repairs. Using the tables below, calculate the maintenance cost assigned to the pharmacy using the existing method and using an ABC approach. Clearly label your calculations in your analysis.

MAINTENANCE COSTS

 routinemaintenance repairs Total Volume(Square Feet) 100,000 800 labor hours 10,000 4000 14,000 labor cost/hour \$12.00 \$18.00 \$13.71 supplies \$20,000 \$80,000 \$100,000 administration \$15,000

DEPARTMENT INFORMATION

 pharmacy all otherdepts. Total square feet 2,000 98,000 100,000 volume of repairs 3 797 800 hours of repairs 6 3,994 4,000 supplies used forrepairs \$200 \$79,800 \$80,000

Thank you

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