Business

The Housekeeping Services Department of Ruger Clinic, a multispecialty practice in Toledo, Ohio, has $100,000 in direct costs during 2015.

These costs must be allocated to Ruger’s three revenue-producing patient services departments using the direct method. Two cost drivers

are under consideration: patient services revenue and hours of housekeeping services used. The patient services departments generated

$5million in total revenues during 2015. To support these clinical activities, the departments used 5,000 hours of housekeeping services.
What is the allocation rate if patient services revenue is used as the cost driver?

Assume that the managers of Fort Winston Hospital are setting the price on a new outpatient service. Here are the relevant data estimates:
Variable cost per visit $5.00
Annual direct fixed costs $500,000
Annual overhead allocation $50,000
Expected annual utilization 10,000 visits

What per visit price must be set for the service to breakeven?

Assume that the managers of Fort Winston Hospital are setting the price on a new outpatient service. Here are the relevant data estimates:
Variable cost per visit $10.00
Annual direct fixed costs $500,000
Annual overhead allocation $50,000
Expected annual utilization 10,000 visits

What per visit price must be set for the service to earn an annual profit of $100,000?