Allocation of Costs. Analyze the following scenario: Jump Hospital currently allocates all maintenance department costs based on departmental square feet. However, the manager of the pharmacy department has suggested that an ABC approach be used for the portion of the maintenance department costs that relate to repairing equipment. Her contention is that the pharmacy has relatively little equipment that breaks. However, it must subsidize many high-tech departments that require expensive equipment repairs. Using the tables below, calculate the maintenance cost assigned to the pharmacy using the existing method and using an ABC approach. Clearly label your calculations in your analysis. Use 1-2 references
Maintenance Costs Routine Maintenance Repairs Total Volume (Square Feet) 100,000 800 Labor Hours 10,000 4000 14,000 Labor Cost/Hour $12.00 $18.00 $13.71 Supplies $20,000 $80,000 $100,000 Administration $15,000
Department Information Pharmacy All Other Departments Total Square Feet 2,000 98,000 100,000 Volume of Repairs 3 797 800 Hours of Repairs 6 3,994 4,000 Supplies Used for Repairs $200 $79,800 $80,000
This class requires you to mathematically solve several financial management problems using simple algebra. The book has step-by-step explanations and examples. Two comments about math:
1) Starting with Assignment 1 you are going to need to manipulate numbers and in many cases submit an MS Excel spreadsheet. In most cases you will also need to submit a short paper about some decision you are recommending. Treat your papers as if you are writing to a “math phobic” boss, e.g., explain what the math means when reaching you recommendation.
- Starting with Week 2 the discussion questions have math problems embedded. I know it may be difficult to “discuss” arithmetic, but are a graduate student. So get creative and get some reasonable 200-word posts in the Dqs.
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