Chapter 4.B, Problem 5P

PROBLEM 4B-5 Step-Down Method L04-11

Woodbury Hospital has three service departments and three operating departments. Estimated cost and operating data for all departments in the hospital for the forthcoming quarter are presented in the table below:

Service Departments
Operating Departments

	Housekeeping Services	Food Services	Admin. Services	Laboratory	Radiology	General Hospital	Total
Total cost	$87,000	$301,060	$249,020	$405,900	$520,500	$475,800	$2,039,280
Meals served			800	2,000	1,000	68,000	71,800
Square feet of space	5.000	13,000	6,500	10,000	7,500	108,000	150,000
Files processed				14,000	7,000	25,000	46,000

The costs of the service departments are allocated by the step-down method using the allocation bases and in the order shown in the following table:

Service Department	Allocation Bases
Housekeeping Services	Square feet of space
Food Services		Meals served
Administrative Services	Ales processed

All tilling in the hospital is done through Laboratory, Radiology or General Hospital. The hospital's administrator wants the costs of the three service departments allocated to these three billing centers.

Required:

Using the step-down method, prepare the cost allocation desired by the hospital administrator. Include under each billing center the direct costs of the center, as well as the costs allocated from the service department.