Problema Solution
The Housekeeping Department of Micanopy Hospital has direct costs of $500,000. The hospital's four patient service departments utilize the following amounts of space:
Department A 1,000 square feet
Department B 2,000
Department C 3,000
Department D 4,000
Assuming that the cost driver for housekeeping costs is the amount of occupied space, what is the allocation of housekeeping costs to Department A?
a. $ 25,000
b. $ 50,000
c. $ 75,000
d. $100,000
e. $125,000
Answer provided by our tutors
Fractional amount of space used by Department A:
1,000/(1,000+2,000+3,000+4,000)=1/10
Therefore Department A will get 1/10 of the total money. We can write:
1/10(500,000)= $50,000