Zoopsia Hospital Has Two Service Departments and Three Operating Departments

question 44

Multiple Choice

Zoopsia Hospital has two service departments and three operating departments. Selected information on the five departments for last year is as follows: Zoopsia allocates Power Generation cost first on the basis of kilowatt hours. Zoopsia then allocates Laundry cost on the basis of the number of employees. Operating costs in Power Generation for last year were $250,000. Operating costs in Laundry for last year were $60,000. No distinction is made between variable and fixed costs.
-If service department costs are allocated using the step-down method, how much service cost will remain in the Power Generation department after allocation?

• A) $0
• B) $6,750
• C) $12,375
• D) $12,500

Comprehend information useful for evaluating the profitability or cost-effectiveness of departmental activities.

Allocate indirect expenses across departments based on various drivers (floor space, ad spots, sales).

Understand responsibility accounting and the creation of performance reports for department managers.

Apply cost allocation methods in the context of educational institution administrative, maintenance, and utilities expenses.

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Definitions:

Standardization

The process of establishing and implementing technical standards to ensure consistency and compatibility among products and services.

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The extent to which a concept, conclusion, or measurement is well-founded and corresponds accurately to the real world.

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Proposed explanations made on the basis of limited evidence as a starting point for further investigation.