Question

Roxbury​'s Radiology Center​ (RRC) performs​ X-rays, ultrasounds, computer tomography​ (CT) scans, and magnetic resonance imaging​ (MRI). RRC has developed a reputation as a top radiology center in the state. RRC has achieved this status because it constantly reexamines its processes and procedures. RRC has been using a​ single, facility-wide overhead allocation rate. The vice president of finance believes that RRC can make better process improvements if it uses more disaggregated cost information. She​ says, "We have​ state-of-the-art medical imaging technology.​ Can't we have​ state-of-the-art accounting​ technology?"

Roxbury's Radiology Center Budgeted Information for the year Ended May 31, 2017
	X-rays	Ultrasound	CT scan	MRI	Total
Technician labor	$98,065	$145,000	$209,320	$140,000	$592,385
Depreciation	160,800	246,000	377,200	716,000	1,500,000
Materials	22,500	16,100	24,500	31,200	94,300
Administration					18,480
Maintenance					270,000
Sanitation					288,192
Utilities					134,190
Total	$281,365	$407,100	$611,020	$887,200	$2,897,547
Number of procedures	2,988	4,380	3,168	2,664
Minutes to clean after each procedure	5	5	20	30
Minutes for each procedure	10	20	15	50

RRC operates at capacity. The proposed allocation bases for overhead​ are:

Administration	Number of procedures
Maintenance​ (including parts)	Capital cost of the equipment​ (use Depreciation)
Sanitation	Total cleaning minutes
Utilities	Total procedure minutes

1. Calculate the budgeted cost per service for​ X-rays, ultrasounds, CT​ scans, and MRI using direct technician labor costs as the allocation basis.

2. Calculate the budgeted cost per service of​ X-rays, ultrasounds, CT​ scans, and MRI if RRC allocated overhead costs using​ activity-based costing.

3. Explain how the disaggregation of information could be helpful to​ RRC's intention to continuously improve its services.

Answer 1