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Cost allocation of food services at a hospital

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Community General Hospital has a Food Services Department that provides meals for all patients in the hospital. Budgeted and actual meals served for the month just ended are:

Meals Served
Budgeted Actual
Pediatrics Department 31,100 25,100
Surgical Department 51,100 77,100
Total meals 82,200 102,200

The budgeted variable cost of meals for the month just ended was $131,520; the actual variable cost of meals for the month was $168,630.

How much of the $168,630 actual Food Services variable cost should be charged to the Surgical Department at the end of the month just completed?

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Solution Summary

This solution shows how to calculate how much of a hospital's Food Services variable cost should be charged to the Surgical Department on a monthly basis.

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The variable costs are allocated = Budgeted rate X actual activity

The reason is that variable costs change with activity so ...

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