Question

Owl-Eye Radiologists (OR) does various types of diagnostic imaging. Radiologists perform tests using sophisticated equipment. OR's management wants to compute the costs of performing tests for two different types of patients: those who are hospitalized (including those in emergency rooms) and those who are not hospitalized but are referred by physicians. The data for June for the two categories of patients follow.

	Hospital Patients			Other Patients			Total
Units (i.e., procedures) produced		660			830			1,490
Equipment-hours used		230			120			350
Direct labor-hours		500			160			660
Direct labor costs	$	40,000		$	9,600		$	49,600
Overhead costs							$	47,780

The accountant first assigns overhead costs to two pools: overhead related to equipment-hours and overhead related to labor-hours. The analysis of overhead accounts by the cost accountant follows.

Account	Amount			Related to:
Utilities	$	4,780		Equipment-hours
Supplies		12,530		Labor-hours
Indirect labor and supervision		19,150		Labor-hours
Equipment depreciation and maintenance		7,970		Equipment-hours
Miscellaneous		3,350		Equipment-hours

Required:

a. Compute the predetermined overhead rates assuming that Owl-Eye Radiologists uses equipment-hours to allocate equipment-related overhead costs and labor-hours to allocate labor-related overhead costs.

Compute the predetermined overhead rates assuming that Owl-Eye Radiologists uses equipment-hours to allocate equipment-related overhead costs and labor-hours to allocate labor-related overhead costs.

	Overhead Rate Equipment-related per hour Labor-related    per hour

b. Compute the total costs of production and the cost per unit for each of the two types of patients undergoing tests in June.

	Hospital Patients Other Patients Total cost       Cost per unit

Answer 1

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