RIO GRANDE MEDICAL CENTER
Cost Allocation Concepts
This case focuses on cost allocation concepts, specifically the fairness and incentives created by
a new allocation system applied to a department that is moving to a new, stand-alone facility.
The primary thrust of the case is qualitative rather than quantitative, but this model can be used
to compare results under alternative allocation schemes.
The model consists of a complete base case analysis--no changes need to be made to the existing
MODEL-GENERATED DATA section. However, in the student version all values in the INPUT DATA
section have been replaced with zeros. Thus, students must enter the appropriate values into the
red cells that currently contain a zero or hyphen. When this is done, any error cells will be corrected
and the base case solution will appear. Note that the model does not contain any uncertainty
analyses, so students will have to create their own if required by the case. Furthermore, students
must create their own graphics output (charts) as needed to present their results.
Dialysis Center Data:
Facilities allocation ($)
$1,900,000 Total direct expenses
Per square foot
$15.83 Facilities costs
Gen overhead alloc.
2,270,000 General overhead
Per revenue $
Total indirect costs
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