(Appendix 4B) Romain Surgical Hospital Uses the Direct Method to Allocate

question 24

Multiple Choice

(Appendix 4B) Romain Surgical Hospital uses the direct method to allocate service department costs to operating departments. The hospital has two service departments, Information Technology and Administration, and two operating departments, Surgery and Recovery.
Information Technology Department costs are allocated on the basis of computer workstations and Administration Department costs are allocated on the basis of employees.
-The total Surgery Department cost after service department allocations is closest to:

• A) $598,249
• B) $608,636
• C) $602,727
• D) $605,827

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Definitions:

Variable Conversion Cost

Costs that vary with the level of production and are associated with converting raw materials into finished goods, excluding fixed costs.

Direct Material

Raw materials that can be directly traced to the production of a specific product and are a part of its finished composition.

Opportunity Costs

The cost of forgoing the next best alternative when making a decision.