St. Luke's hospital has three support departments and four patient services departments. The direct costs to each of the support departments are as follows:

General Administration $4,000,000

Maintenance $5,000,000

Employee Benefits $4,000,000

Patient Space Number of Salary Dollars

                             Services                 (sq ft)                        FTEs            

Department Revenue

   Support

General 8,000 15 $2,500,000

Administration

Maintenance 10,000 75 3,500,000

Employee Benefits 7,000 50 3,000,000

Total 25,000 140 9,000,000

Patient Services:

Routine Care $ 40,000,000 500,000 700 $18,000,000

Intensive Care 7,000,000 45,000 200 6,000,000

Obstetrics Services 4,000,000 35,000 150 4,000,000

Other Services 12,000,000 200,000 400 8,000,000

Total $63,000,000 780,000 1,450 $36,000,000

Grand Total $63,000,000 805,000 1,590 $45,000,000

Assume the hospital uses the direct method for cost allocation. Furthermore, the cost drive for general administration is patient services revenue, the cost driver for maintenance is space utilization, and the cost driver for employee benefits is the number of full time equivalent employees.

a. What are the appropriate allocation rates?

b. Use an allocation table similar to Exhibit 6.7 to allloate the hospital's overhead costs to the patient services department.