Rainier Valley Health Center is the location for three major activities: A Gener

Rainier Valley Health Center is the location for three major activities: A General Medical Clinic, a Mental Health Center, and a Health Education Outreach Program. The Medical Clinic is supported by fees, donations, and a lump-sum grant from the county. The Mental Health Center’s costs are reimbursed under a pilot state project. The Educational Outreach Program is supported by a private donor.
Many costs can be directly traced to the three programs, but some cannot. These indirect costs are: rent, general administration, and utilities. These costs are reimbursable under state guidelines to the extent that they can be attributed to the Mental Health Center. For this purpose, the state guidelines state, “Indirect costs can be allocated using a logical basis.” Conversations with the state auditor’s office reveal that the following allocation bases are acceptable for the following costs:
Indirect Cost
Acceptable Allocation Bases
Rent
1. Square Feet Occupied
2. Number of Patient Visits
General Administration
1. Direct Program Costs
2. Program Salaries
Utilities
1. Number of Patient Visits
2. Hours of Operation
Rainier Valley Health Center has Rent of $30,000, General Administration of $30,000, and Utilities of $10,000.
You collected the following information about the allocation bases: Allocation Base Medical ClinicMental Health CenterEducational OutreachTotal
Square Feet Occupied150010005003000
# of Patient Visits60002000200010000
Direct Program Costs$130,000$50,000$20,000$200,000
Program Salaries$60,000$42,000$18,000$120,000
Hours of Operation per year250018002004500
Suppose Rent is allocated on the basis of square feet occupied, General Administration on the basis of direct program costs, and utilities on the basis of patient visits. What is the total indirect cost allocated to the Mental Health Center and thus reimbursable under the state pilot project?
Suppose you are free to choose the allocation base from the list of acceptable allocation bases for each allocable indirect cost. If you objective is to maximize reimbursement by the state, what allocation basis should you choose for each allocable indirect cost? What is the total indirect cost reimbursable by the state if these allocation bases are used?