David Jones, the new administrator for a surgical clinic, was trying to determine how to allocate his indirect expenses. His staff was complaining that the current method of taking a percentage of revenues was unfair. He decided to try to allocate utilities based on square footage of each department, administration based on direct costs, and laboratory based on tests. Use the information in the chart below to answer problems 22, 23 and 24. Square Footage DirectExpenses Lab Tests Utilities $200,000 Administration 2,000 500,000 Laboratory 2,000 625,000 Day-op Suite 3,000 1,400,000 4,000 Cystoscopy 1,500 300,000 500 Endoscopy 1,500 600,000 500 Total 10,000 $3,375,000 5,000 1. What are the Day Op Suite’s total expenses? 2. What are the Cystoscopy Department’s total expenses? 3. What are the Endoscopy Department’s total expenses?

David Jones, the new administrator for a surgical clinic, was trying to determine how to allocate his indirect expenses. His staff was complaining that the current method of taking a percentage of revenues was unfair. He decided to try to allocate utilities based on square footage of each department, administration based on direct costs, and laboratory based on tests. Use the information in the chart below to answer problems 22, 23 and 24. Square Footage DirectExpenses Lab Tests Utilities $200,000 Administration 2,000 500,000 Laboratory 2,000 625,000 Day-op Suite 3,000 1,400,000 4,000 Cystoscopy 1,500 300,000 500 Endoscopy 1,500 600,000 500 Total 10,000 $3,375,000 5,000 1. What are the Day Op Suite’s total expenses? 2. What are the Cystoscopy Department’s total expenses? 3. What are the Endoscopy Department’s total expenses?

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter3: Cost Behavior

Section: Chapter Questions

Problem 17E: Deepa Dalal opened a free-standing radiology clinic. She had anticipated that the costs for the...

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	Square Footage	DirectExpenses	Lab Tests
Utilities		$200,000
Administration	2,000	500,000
Laboratory	2,000	625,000
Day-op Suite	3,000	1,400,000	4,000
Cystoscopy	1,500	300,000	500
Endoscopy	1,500	600,000	500
Total	10,000	$3,375,000	5,000