Department and activity-cost rates, service sector. Raynham’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 nance 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?” Raynham's Radiology Center Budgeted Information for the Year Ended May 31, 2017X-raysUltrasoundCT ScanMRITotal$ 62,000$155,000 $ 103,000 $ 421,000876,800Technician laborDepreciationMaterials$101,000256,00016,40042,240424,9601,600,00022,60023,60031,50094,100Administration20,000Maintenance250,000Sanitation252,500Utilities151,100$126,840$373,4004,352$603,560 $1,011,300 $2,788,7002,4823,8422,924Number of proceduresMinutes to clean after each procedureMinutes for each procedure5515355152540RRC operates at capacity. The proposed allocation bases for overhead are:AdministrationNumber of proceduresCapital cost of the equipment(use Depreciation)Total cleaning minutesTotal procedure minutesMaintenance (including parts)SanitationUtilities1. Calculate the budgeted cost per service for X-rays, ultrasounds, CT scans, and MRI using direct tech-Requirednician labor costs as the allocation basis.2. Calculate the budgeted cost per service of X-rays, ultrasounds, CT scans, and MRI if RRC allocatedoverhead costs using activity-based costing.3. Explain how the disaggregation of information could be helpful to RRC's intention to continuously im-prove its services.

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FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

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Department and activity-cost rates, service sector. Raynham’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 nance 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?”

Raynham's Radiology Center Budgeted Information for the Year Ended May 31, 2017
X-rays
Ultrasound
CT Scan
MRI
Total
$ 62,000
$155,000 $ 103,000 $ 421,000
876,800
Technician labor
Depreciation
Materials
$101,000
256,000
16,400
42,240
424,960
1,600,000
22,600
23,600
31,500
94,100
Administration
20,000
Maintenance
250,000
Sanitation
252,500
Utilities
151,100
$126,840
$373,400
4,352
$603,560 $1,011,300 $2,788,700
2,482
3,842
2,924
Number of procedures
Minutes to clean after each procedure
Minutes for each procedure
5
5
15
35
5
15
25
40
RRC operates at capacity. The proposed allocation bases for overhead are:
Administration
Number of procedures
Capital cost of the equipment
(use Depreciation)
Total cleaning minutes
Total procedure minutes
Maintenance (including parts)
Sanitation
Utilities
1. Calculate the budgeted cost per service for X-rays, ultrasounds, CT scans, and MRI using direct tech-
Required
nician 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 im-
prove its services.

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