Kolinski Surgical Hospital Uses the Direct Method to Allocate Service

question 75

Multiple Choice

Kolinski Surgical Hospital uses the direct method to allocate service department costs to operating departments. The hospital has two service departments, Telecommunications and Administration, and two operating departments, Surgery and Recovery. Telecommunications Department costs are allocated on the basis of the number of telecommunications ports in departments and Administration Department costs are allocated on the basis of employees. The total Surgery Department cost after service department allocations is closest to:

• A) $317,118
• B) $314,853
• C) $310,244
• D) $305,921

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Definitions:

Profit Margin

A financial performance metric that measures the amount of net income earned with each dollar of sales generated by comparing net income to revenue.

Asset Turnover Ratios

Financial metrics that measure the efficiency of a company in using its assets to generate sales or revenue.

Inventory Turnover Ratio

The inventory turnover ratio is a measure of how often a company sells and replaces its stock of goods within a certain period, indicating the efficiency of inventory management.

Cost of Goods Sold

The direct costs attributable to the production of the goods sold by a company, including the cost of materials and labor.