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Finance: Cost Allocation for St. Mary's Hospital

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Assume that the hospital uses salary dollar as the cost driver for the General Administration, housekeeping labor hours as the cost driver for Facilities, and patient services revenue as the cost driver for Financial Services. (The majority of the costs of the Facilities Department are devoted to housekeeping services)

a. What are the appropriate allocations rates?

b. Allocate the hospital's overhead cost to the patient services departments.

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Solution Summary

The solution explains how to allocate service department costs to patient services departments.