The laboratory services department for Swank Medical Systems has $300,000 in direct costs during 2012. These costs must be allocated to Swank’s three revenue producing patient services departments using the direct method. Two cost drivers are under consideration; patient services revenue and hours of laboratory services used. The patient services departments generated $6 million in total revenues in 2012, and to support these clinical activities, they used 6,000 hours of laboratory services.
a. What is the value of the cost pool?
b. What is the allocation rate if
• Patient services revenue is used as the cost driver?
• Hours of laboratory services is used as the cost driver?