Problem:

Assume that the three patient services departments are Adult Services, Pediatric Services, and Other Services. The patient services revenue and hours of housekeeping services for each department are as follows:

Department - Revenue - Housekeeping Hours

Adult Services $3,000,000 - 1,500

Pediatric Services $1,500,000 - 3,000

Other Services $500,000 - 500

Total $5,000,000 - 5,000

Question 1: What is the dollar allocation to each patient services department if patient services revenue is used as the cost driver?

Question 2: What is the dollar allocation to each patient services department if hours of housekeeping support are used as the cost driver?

Question 3: What is the difference in the allocation to each department between the two drivers?

Question 4: Which of the two drivers is better? Why?

Explain in detail and provide step by step solution.