Question

Rooney Health Care Center, Inc. has three clinics servicing the Seattle metropolitan area. The company's legal services department supports the clinics. Moreover, its computer services department supports all of the clinics and the legal services department. The annual cost of operating the legal services department is $352,850. The annual cost of operating the computer services department is $336,200. The company uses the number of patients served as the cost driver for allocating the cost of legal services and the number of computer workstations as the cost driver for allocating the cost of computer services. Other relevant information follows. Sewell clinic Alphretta clinic Gwinnett clinic Legal services Computer services Number of Patients 7,700 4,500 6,500 Number of Workstations 6 12 17 6 16 Required a. Allocate the cost of computer services to all of the clinics and the legal services department. b. After allocating the cost of computer services, allocate the cost of legal services to the three clinics. c. Compute the total allocated cost of service centers for each clinic.

Answer 1

	Number of Patients	Number of Workstations
Sewell clinic	7,700	6
Alphretta clinic	4,500	12
Gwinnett clinic	6,500	17
Legal services		6
Total	18,700	41
1)
Allocation rate for computer service = Computer services cost/ No. of workstations
Allocation rate for computer service = $336,200/41	$       8,200.00		per workstation
Sewell clinic	$       8,200.00	x	6 workstations	=	$49,200
Alphretta clinic	$       8,200.00	x	12 workstations	=	$98,400
Gwinnett clinic	$       8,200.00	x	17 workstations	=	$139,400
Legal services	$       8,200.00	x	6 workstations	=	$49,200
Total allocated cost					$336,200
2)
Allocation rate = Legal services cost/No. of patients
Allocation rate = ($352,850 + $49,200)/18,700	$21.50		per patients
Department	Allocation Rate	x	Weight of Base	=	Allocated Cost
Sewell clinic	$21.50	x	7,700 patients	=	$ 165,550.00
Alphretta clinic	$21.50	x	4,500 patients	=	$   96,750.00
Gwinnett clinic	$21.50	x	6,500 patients	=	$ 139,750.00
Total allocated cost					$ 402,050.00
3)
Department	Allocated to computer Service		Allocated to Legal Service	=	Total allocated cost
Sewell clinic	$49,200	+	$       165,550.00	=	$214,750.00
Alphretta clinic	$98,400	+	$         96,750.00	=	$195,150.00
Gwinnett clinic	$139,400	+	$       139,750.00	=	$279,150.00
Total allocated cost	$287,000	+	$402,050	=	$689,050.00