Dubey Surgical Hospital uses the direct method to allocate service department costs to operating departments. The hospital has two service departments, Telecommunications and Administration, and two operating departments, Surgery and Recovery. Telecommunications Department costs are allocated on the basis of the number of telecommunications ports in departments and Administration Department costs are allocated on the basis of employees. The total Surgery Department cost after service department allocations is closest to:
A)$481,336
B)$484,059
C)$473,169
D)$478,133

Question

Dubey Surgical Hospital uses the direct method to allocate service department costs to operating departments. The hospital has two service departments, Telecommunications and Administration, and two operating departments, Surgery and Recovery.  Telecommunications Department costs are allocated on the basis of the number of telecommunications ports in departments and Administration Department costs are allocated on the basis of employees. The total Surgery Department cost after service department allocations is closest to:
A)$481,336 
B)$484,059 
C)$473,169 
D)$478,133

Quizplus · Accepted Answer

We need to calculate the total cost allocated to Surgery department after service department allocations. First, we need to allocate the service department costs to the operating departments.
 
Telecommunications department allocation:

Surgery department = ($3/port x 45 ports) = $135
Recovery department = ($3/port x 35 ports) = $105

Administration department allocation:

Surgery department = ($4,000/employee x 10 employees) = $40,000
Recovery department = ($4,000/employee x 5 employees) = $20,000

Total allocated costs for the Surgery department = $50,000 + $135 = $50,135

Therefore, the best choice is B.

Dubey Surgical Hospital Uses the Direct Method to Allocate Service