Eldercare One, Two and Three are managed as a profit centers by the parent company. Revenues were $1,200,000, $500,000 and $300,000, respectively, and patients numbered 270, 80 and 50, respectively. Insurance costs of $625,000 are allocated to each center based on number of patients. Eldercare One would be allocated insurance cost of:

Question

Quizplus · Accepted Answer

The total number of patients is 270 + 80 + 50 = 400. Eldercare One has 270 patients, which is 270/400 = 67.5% of the total patients. Therefore, Eldercare One would be allocated 67.5% of the $625,000 insurance costs, which is $625,000 * 67.5% = $421,875.

Eldercare One, Two and Three Are Managed as a Profit