Rashaad'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?" 1(Click the icon to view the budgeted information.) 2(Click the icon to view additional information.) Read the requirements3. Requirement 1. Calculate the budgeted cost per service for X-rays, ultrasounds, CT scans, and MRI using direct technician labor costs as the allocation basis. Start by calculating the budgeted overhead rate for total indirect costs based on total labor. First select the formula, then enter the applicable amounts and calculate the rate. (Round your answer to two decimal places, X.XX. Abbreviations used: DC = Direct cost, DL = Direct labor, $ = dollar.) (1) ÷ (2) = Budgeted overhead rate ÷ = (3) Now calculate the total budgeted costs for each service and the budgeted cost per each service using direct technician labor costs as the allocation basis. (Round the budgeted cost per service to the nearest cent.) X-rays Technician labor Depreciation Materials Indirect costs Total budgeted costs Budgeted cost per service Ultrasound CT scan MRI Requirement 2. Calculate the budgeted cost per service of X-rays, ultrasounds, CT scans, and MRI if RRC allocated overhead costs using activity-based costing. Begin by calculating the cost driver rate per activity. (Round the answers to five decimal places, "X.XXXXX".) (4) ÷ (5) = Cost driver rate Administration ÷ = (6) Maintenance ÷ = (7) Sanitation ÷ = (8) Utility ÷ = (9) Now calculate the budgeted cost for each service and the budgeted cost per service using activity-based costing. (Round costs to the nearest whole dollar. Then round the cost per service to the nearest cent.) X-rays Technician labor Depreciation Materials Administration Maintenance Sanitation Utilities Total budgeted costs Budgeted cost per service Ultrasound CT scan MRI Requirement 3. Explain how the disaggregation of information could be helpful to RRC's intention to continuously improve its services. Using the disaggregated activity-based costing data, A. Managers can see that the CT scans are extremely more costly than the x-rays, ultrasounds, or MRI's. This causes managers to focus on ways of reducing the number of procedures so costs can stay at a minimum. B. Managers can see that the X-ray actually costs substantially more than the MRI, ultrasounds, and CT scans. This is why the number of procedures for this method of activity is the lowest for each group of activity. C. Managers can see that the ultrasounds actually cost the same as the other group of activities. Managers should feel indifferent in trying to obtain ways to continuously improve in this area. D. Managers can see that the MRI actually costs substantially more and x-rays, ultrasounds, and CT scans substantially less than the traditional system indicated. Managers should examine the use of maintenance and sanitation activities to search for ways to reduce the activity costs. 1: Data Table Rashaad's Radiology Center Budgeted Information for the year Ended May 31, 2017 X-rays Ultrasound CT scan MRI Total Technician labor $80,000 $111,000 $164,000 $113,200 $468,200 Depreciation 42,240 256,000 424,960 876,800 1,600,000 Materials 22,400 16,700 23,700 30,900 93,700 Administration 20,800 Maintenance 272,000 Sanitation 252,300 Utilities 157,200 Total $144,640 $383,700 $612,660 $1,020,900 $2,864,200 Number of procedures 2,900 4,400 3,100 2,600 Minutes to clean after each procedure 5 5 15 35 Minutes for each procedure 5 15 25 40 2: Data Table 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 3: Requirements 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.

Rashaad'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?" 1(Click the icon to view the budgeted information.) 2(Click the icon to view additional information.) Read the requirements3. Requirement 1. Calculate the budgeted cost per service for X-rays, ultrasounds, CT scans, and MRI using direct technician labor costs as the allocation basis. Start by calculating the budgeted overhead rate for total indirect costs based on total labor. First select the formula, then enter the applicable amounts and calculate the rate. (Round your answer to two decimal places, X.XX. Abbreviations used: DC = Direct cost, DL = Direct labor, $ = dollar.) (1) ÷ (2) = Budgeted overhead rate ÷ = (3) Now calculate the total budgeted costs for each service and the budgeted cost per each service using direct technician labor costs as the allocation basis. (Round the budgeted cost per service to the nearest cent.) X-rays Technician labor Depreciation Materials Indirect costs Total budgeted costs Budgeted cost per service Ultrasound CT scan MRI Requirement 2. Calculate the budgeted cost per service of X-rays, ultrasounds, CT scans, and MRI if RRC allocated overhead costs using activity-based costing. Begin by calculating the cost driver rate per activity. (Round the answers to five decimal places, "X.XXXXX".) (4) ÷ (5) = Cost driver rate Administration ÷ = (6) Maintenance ÷ = (7) Sanitation ÷ = (8) Utility ÷ = (9) Now calculate the budgeted cost for each service and the budgeted cost per service using activity-based costing. (Round costs to the nearest whole dollar. Then round the cost per service to the nearest cent.) X-rays Technician labor Depreciation Materials Administration Maintenance Sanitation Utilities Total budgeted costs Budgeted cost per service Ultrasound CT scan MRI Requirement 3. Explain how the disaggregation of information could be helpful to RRC's intention to continuously improve its services. Using the disaggregated activity-based costing data, A. Managers can see that the CT scans are extremely more costly than the x-rays, ultrasounds, or MRI's. This causes managers to focus on ways of reducing the number of procedures so costs can stay at a minimum. B. Managers can see that the X-ray actually costs substantially more than the MRI, ultrasounds, and CT scans. This is why the number of procedures for this method of activity is the lowest for each group of activity. C. Managers can see that the ultrasounds actually cost the same as the other group of activities. Managers should feel indifferent in trying to obtain ways to continuously improve in this area. D. Managers can see that the MRI actually costs substantially more and x-rays, ultrasounds, and CT scans substantially less than the traditional system indicated. Managers should examine the use of maintenance and sanitation activities to search for ways to reduce the activity costs. 1: Data Table Rashaad's Radiology Center Budgeted Information for the year Ended May 31, 2017 X-rays Ultrasound CT scan MRI Total Technician labor $80,000 $111,000 $164,000 $113,200 $468,200 Depreciation 42,240 256,000 424,960 876,800 1,600,000 Materials 22,400 16,700 23,700 30,900 93,700 Administration 20,800 Maintenance 272,000 Sanitation 252,300 Utilities 157,200 Total $144,640 $383,700 $612,660 $1,020,900 $2,864,200 Number of procedures 2,900 4,400 3,100 2,600 Minutes to clean after each procedure 5 5 15 35 Minutes for each procedure 5 15 25 40 2: Data Table 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 3: Requirements 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.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

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Rashaad'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?"

1(Click

the icon to view the budgeted information.)

2(Click

the icon to view additional information.)

Read the

requirements3.

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

Start by calculating the budgeted overhead rate for total indirect costs based on total labor. First select the formula, then enter the applicable amounts and calculate the rate. (Round your answer to two decimal places, X.XX. Abbreviations used: DC = Direct cost, DL = Direct labor, $ = dollar.)

(1)	÷	(2)	=	Budgeted overhead rate
	÷		=		(3)

Now calculate the total budgeted costs for each service and the budgeted cost per each service using direct technician labor costs as the allocation basis. (Round the budgeted cost per service to the nearest cent.)

	X-rays
Technician labor
Depreciation
Materials
Indirect costs
Total budgeted costs
Budgeted cost per service

Ultrasound

CT scan

MRI

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

Begin by calculating the cost driver rate per activity. (Round the answers to five decimal places, "X.XXXXX".)

	(4)	÷	(5)	=	Cost driver rate
Administration		÷		=		(6)

Maintenance

(7)

Sanitation

(8)

Utility

(9)

Now calculate the budgeted cost for each service and the budgeted cost per service using activity-based costing. (Round costs to the nearest whole dollar. Then round the cost per service to the nearest cent.)

	X-rays
Technician labor
Depreciation
Materials
Administration
Maintenance
Sanitation
Utilities
Total budgeted costs
Budgeted cost per service

Ultrasound

CT scan

MRI

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

Using the disaggregated activity-based costing data,

Managers can see that the CT scans are extremely more costly than the x-rays, ultrasounds, or MRI's. This causes managers to focus on ways of reducing the number of procedures so costs can stay at a minimum.

Managers can see that the X-ray actually costs substantially more than the MRI, ultrasounds, and CT scans. This is why the number of procedures for this method of activity is the lowest for each group of activity.

Managers can see that the ultrasounds actually cost the same as the other group of activities. Managers should feel indifferent in trying to obtain ways to continuously improve in this area.

Managers can see that the MRI actually costs substantially more and x-rays, ultrasounds, and CT scans substantially less than the traditional system indicated. Managers should examine the use of maintenance and sanitation activities to search for ways to reduce the activity costs.

1: Data Table

Rashaad's Radiology Center Budgeted Information for the year Ended May 31, 2017
	X-rays	Ultrasound	CT scan	MRI	Total
Technician labor	$80,000	$111,000	$164,000	$113,200	$468,200
Depreciation	42,240	256,000	424,960	876,800	1,600,000
Materials	22,400	16,700	23,700	30,900	93,700
Administration					20,800
Maintenance					272,000
Sanitation					252,300
Utilities					157,200
Total	$144,640	$383,700	$612,660	$1,020,900	$2,864,200
Number of procedures	2,900	4,400	3,100	2,600
Minutes to clean after each procedure	5	5	15	35
Minutes for each procedure	5	15	25	40

2: Data Table

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

3: Requirements

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.

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