Question description
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. Maintenance CostsRoutine MaintenanceRepairsTotalVolume (Square Feet)100,000800Labor Hours10,000400014,000Labor Cost/Hour$12.00$18.00$13.71Supplies$20,000$80,000$100,000Administration$15,000Department InformationPharmacyAll Other DepartmentsTotalSquare Feet2,00098,000100,000Volume of Repairs3797800Hours of Repairs63,9944,000Supplies Used for Repairs$200$79,800$80,000use reference belowReferenceFinkler, S. A., Purtell, R.M., Calabrese, T.D., & Smith, D.L. (2013). Financial management for public, health, and not-for-profit organizations (4th ed.). Upper Saddle River, NJ: Pearson Prentice Hall.
