help with ABC approach

FratBro23
Category:
Business & Finance
Price: $15 USD

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

 

 routine
maintenance
repairsTotal
Volume
(Square Feet)
100,000800 
labor hours10,000400014,000
labor cost/hour$12.00$18.00$13.71
supplies$20,000$80,000$100,000
administration  $15,000

DEPARTMENT INFORMATION

 

 pharmacyall other
depts.
Total
square feet2,000
98,000

100,000
volume of repairs3797800
hours of repairs63,9944,000

supplies used for

repairs

$200 $79,800 $80,000

Thank you




 

Tutor Answer

(Top Tutor) Daniel C.
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School: Duke University
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