Silguero Clinic has two service departments, Administrative and Support, and two operating departments, Adult Medicine and Pediatrics. The clinic uses the direct method to allocate service department costs to operating departments. Administrative Department costs are allocated on the basis of employee hours and Support Department costs are allocated on the basis of space occupied in square feet.
-The total Pediatrics Department cost after the allocations of service department costs is closest to:

Question

Silguero Clinic has two service departments, Administrative and Support, and two operating departments, Adult Medicine and Pediatrics.  The clinic uses the direct method to allocate service department costs to operating departments. Administrative Department costs are allocated on the basis of employee hours and Support Department costs are allocated on the basis of space occupied in square feet.
-The total Pediatrics Department cost after the allocations of service department costs is closest to:

Quizplus · Accepted Answer

The allocation of service department costs is as follows:

- Administrative Department: allocated based on employee hours
   - Adult Medicine: (10/22) x $500,000 = $227,273
   - Pediatrics: (12/22) x $500,000 = $272,727
   
- Support Department: allocated based on space occupied in square feet
   - Adult Medicine: (3,500/6,000) x $800,000 = $466,667
   - Pediatrics: (2,500/6,000) x $800,000 = $333,333
   
The total cost for each operating department, including the allocated service department costs, is:

- Adult Medicine: $500,000 + $227,273 + $466,667 = $1,194,940
- Pediatrics: $700,000 + $272,727 + $333,333 = $1,306,060

Therefore, the closest answer is B) $524,830.

Silguero Clinic Has Two Service Departments, Administrative and Support, and Two