Question

Consider the following data for a clinical laboratory:

Activity	Annual Costs	Cost Driver		Test A	Test B	Test C	Test D	Total Units	Allocation
Receive specimen	$             10,000	Number of tests		2,000	1,500	1,000	500	5,000	$            2.00
Equipment set-up	25,000	Number of minutes per test		5	5	10	10	30	$      833.33
Run test	100,000	Number of minutes per test		1	5	10	20	36	$ 2,777.78
Record results	10,000	Number of minutes per test		2	2	2	4	10	1,000
Transmit results	5,000	Number of minutes per test		3	3	3	3	12	416.67
Total	$          150,000
Test Value		$ per test
Activity	Allocation	Test A	Test B	C	D	Tot
Receive specimen	$                   2.00	$                        2.00
Equipment set-up	$             833.33	$             4,166.67
Run test	$         2,777.78	$             2,777.78
Record results
Transmit results
Total		$             6,946.44
Total for all		$13,892,888.89				$      13,892,889

a. Using ABC techniques, determine the allocation rate for each activity. (I think I did it correctly above, but I'd like a double check).

b. Now, using this allocation rate, estimate the total cost of performing each test.

c. Verify that the total annual costs aggregated from individual test costs equal the total annual costs of the laboratory given in the table above.

PLEASE SHOW ALL WORK.

Answer 1

	Total Cost
	Test A	Test B	Test C	Test D
Receiving Specimen	4,000 (2,000*2)	3,000 (1,500*2)	2,000 (1,000*2)	1,000 (500*2)
Set up Equipment	7,700 (2,000*5*.77)	5,775 (1,500*5*.77)	7,700 (1,000*10*.77)	3,850 (500*10*.77)
Run Test	6,780 (2,000*1*3.39)	25,425 (1,500*5*3.39)	33,900 (1,000*10*3.39)	33,900 (500*20*3.39)
Record Results	3,640 (2,000*2*.91)	2,730 (1,500*2*.91)	1,820 (1,000*2*.91)	1,820 (500*4*,91)
Transmit Results	1,980 (2,000*3*.33)	1,485 (1,500*3*.33)	990 (1,000*3*.33)	495 (500*3*.33)
Total Cost	$24,100	$38,415	$46,410	$41,065