Kormos Surgical Hospital Uses the Direct Method to Allocate Service

question 30

Multiple Choice

Kormos 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) $485,219
• B) $481,451
• C) $476,168
• D) $487,892

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Definitions:

Other Revenues

Revenue generated from secondary or ancillary activities, distinct from the main business operations.

Effective Tax Rate

is the average rate at which an individual or corporation is taxed, calculated by dividing the total tax paid by the taxable income.

Fair Value

The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

Goodwill

Represents the intangible asset arising when a company acquires another business for more than the fair value of its net identifiable assets.