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     810     1,470   Equipment-hours used   220     150     370   Direct labor-hours   480     170     650   Direct labor costs $ 38,400   $ 10,200   $ 48,600   Overhead costs             $ 48,500       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 $ 4,860   Equipment-hours Supplies   12,590   Labor-hours Indirect labor and supervision   19,260   Labor-hours Equipment depreciation and maintenance   8,440   Equipment-hours Miscellaneous   3,350   Equipment-hours   Required: a. Compute the predetermined overhead rates assuming that Owl-Eye Radiologists use equipment hours to allocate equipment-related overhead costs and labor-hours to allocate labor-related overhead costs. b. Compute the total costs of production and the cost per unit for each of the two types of patients undergoing tests in June.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
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Chapter1: Financial Statements And Business Decisions
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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     810     1,470  
Equipment-hours used   220     150     370  
Direct labor-hours   480     170     650  
Direct labor costs $ 38,400   $ 10,200   $ 48,600  
Overhead costs             $ 48,500  
 

 

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 $ 4,860   Equipment-hours
Supplies   12,590   Labor-hours
Indirect labor and supervision   19,260   Labor-hours
Equipment depreciation and maintenance   8,440   Equipment-hours
Miscellaneous   3,350   Equipment-hours
 


Required:

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

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

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