Harbor City Children’s Hospital Harvard Case Solution & Analysis


            The Harbor City Children’s Center is operating under the hospital business in Torrance. It provides counseling and other related services to the community of Torrance as well as its neighboring communities.

            The last period's funding was provided by the federal government as the part of health services provided in the inner-city poverty areas. Currently, Con away realized that the government findings may not continue for the future years, therefore the hospital must be self-sufficient as soon as it is possible. The Center has currently shown a deficit in the amount of $46,200 (Exhibit 1).

            The Center has eight clients related service departments, namely; Homemaker Services, Family Planning, counseling, Parent’s Advocacy, Mental Health, Alcoholic Rehabilitation, Community Outreach, and federal and placement. It has training and education center that does not provide client related services.


            The analysis is about the step-down analysis of the center in which the center tries to eliminate all those cost that cannot affect the current operating efficiency and the quality to run the center. The benefits to the company through this analysis should be disclosed and in analysis any flaws under the current system are rectified. The detailed analysis is given below.

Step-down analysis with training and education treated as a service center.

            The step down analysis is made to have right cost related to the individual cost centers. In this case, there are eight cost centers that are named above. There are some service centers that are available in the hospital to serve these cost centers and those service centers are; rent, utilities and cleaning, administration, record keeping, and training and education. These are the service departments that use to provide its services to those eight cost centers, therefore the cost of these service centers must be borne by eight cost centers.

            The first allocation is required for the rent, utilities and cleaning service. The service is provided to all the other cost centers and service centers. The rent is always based on the covered area, therefore the rent allocation must be based upon the covered area, every cost center and service center has some covered area and the space occupied by each of the cost center and service center is shown in exhibit 3 of the case. The cleaning service is given to the hospital; therefore the cleaning service must be allocated on the basis of the covered area of each department. The utilities are also used by all the divisions, including cost centers and service centers, the utilities consumption is assumed to be allocated on the basis of covered area because of the nature of the utilities like electricity and other utilities are used on the basis of covered area. All these three expenses must be allocated to eight cost centers and three service centers and the individual allocation is shown in exhibit B of the solution appendix. The total allowable cost of this service center is $208,000 as it is given in the case and the total covered are in the hospital is 1 million square feet. The average rate per 100 square feet is $20.8 (Exhibit B).

            The other service center is administration department that provides its assistance to all eight cost centers, but not other three service centers. The administration department deals with the visitors/clients and the visitors come for only these eight cost centers that are also revenue centers. The cost related to administration department must be allocated to all the cost centers on the basis of number of visits in each of the department. The administration service is given to the visitors, therefore this service center is facilitation the eight cost centers. Thus, the best way of allocation is the number of visits for each individual cost center. The total number of visits of the hospital is 32,900 and the individual visits are given in the exhibit 2 of the case. The total cost of the administration service center after absorbing the rent, cleaning and utilities is $170,400 and the allocated cost to each of cost center is shown in Exhibit B of the solution. The average administrative expense per visit is $5.18 (Exhibit B).

Harbor City Children’s Hospital Case Solution

            The third service center is a record keeping center; the service center keeps the record of each of the visitor and maintains it for any further assistance to the visitor in the future days. Its work is purely related to the number of visits. The service center maintains the record of every individual visitor and the visitors come to take any of the eight services that the hospital provides to its visitors..............

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