Week 3 6-1 6-2

| August 1, 2016

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Study Table 6–1, Table 6–2, and review the chapter text describing how the indirect cost is allocated. This assignment will change the allocation bases input for (A) Number of Visits (Volume), (B) Proportion of Direct Costs, and (C) Number of Computers in Service.



  1. Compute the costs allocated to cost centers “Clerical Salaries,” “Administrative Salaries,” and “Computer Services” using the new allocation bases shown below. Use worksheet #1 that replicates the set up in Table 6–2. Total the new results. The new allocation bases are: A = # Visits (Volume): PT = 9,600/OT = 4,000/ST = 2,400/Total = 16,000 (16,000 × $3.50 = $56,000) B = Proportion of Direct Costs: PT = 60%/OT = 25%/ST = 15%/Total = 100% (% × $55,000) C = # Computers in Service: PT = 10/OT = 3/ST = 3/Total = 16 (16 × $5,000 each = $80,000). 2. Using worksheet #2 that replicates the set up in Table 6–1, enter the new direct cost and the new totals for indirect costs resulting from your work. Total the new results.


Practice Exercise 6–II: Responsibility Centers


The Metropolis Health System has one director who supervises the areas of Security, Communications, and Ambulance Services. This director also supervises the medical records relevant to Ambulance Services, the educational training for Security and Ambulance Services personnel, and the human resources for Security, Communications, and Ambulance Services personnel.




Of the duties and services described, all of which are supervised by one director, which areas should be responsibility centers and which areas should be support centers? Draw them in a visual and indicate the reporting requirements.

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Week 2 5-1 5-2
Business Plan (Introduction)


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