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 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 technol- ogy. 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 $101,000 MRI Total Technician labor Depreciation $155,000 $ 103,000 $ 421,000 $ 62,000 42,240 22,600 256,000 424,960 23,600 876,800 31,500 1,600,000 94,100 20,000 250,000 252,500 151,100 $2,788,700 Materials 16,400 Administration Maintenance Sanitation Utilities $126,840 3,842 $373,400 4,352 $603,560 $1,011,300 2,924 15 Number of procedures Minutes to clean after each procedure Minutes for each procedure 2,482 35 15 25 40 RRC operates at capacity. The proposed allocation bases for overhead are: Number of procedures Administration Maintenance (including parts) Capital cost of the equipment (use Depreciation) Total cleaning minutes Total procedure minutes Sanitation Utilities
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 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 technol- ogy. 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 $101,000 MRI Total Technician labor Depreciation $155,000 $ 103,000 $ 421,000 $ 62,000 42,240 22,600 256,000 424,960 23,600 876,800 31,500 1,600,000 94,100 20,000 250,000 252,500 151,100 $2,788,700 Materials 16,400 Administration Maintenance Sanitation Utilities $126,840 3,842 $373,400 4,352 $603,560 $1,011,300 2,924 15 Number of procedures Minutes to clean after each procedure Minutes for each procedure 2,482 35 15 25 40 RRC operates at capacity. The proposed allocation bases for overhead are: Number of procedures Administration Maintenance (including parts) Capital cost of the equipment (use Depreciation) Total cleaning minutes Total procedure minutes Sanitation Utilities
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Q.Explain how the disaggregation of information could be helpful to RRC’s intention to continuously improve its services.
Transcribed Image Text: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 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 technol-
ogy. 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
$101,000
MRI
Total
Technician labor
Depreciation
$155,000 $ 103,000 $ 421,000
$ 62,000
42,240
22,600
256,000
424,960
23,600
876,800
31,500
1,600,000
94,100
20,000
250,000
252,500
151,100
$2,788,700
Materials
16,400
Administration
Maintenance
Sanitation
Utilities
$126,840
3,842
$373,400
4,352
$603,560 $1,011,300
2,924
15
Number of procedures
Minutes to clean after each procedure
Minutes for each procedure
2,482
35
15
25
40
RRC operates at capacity. The proposed allocation bases for overhead are:
Number of procedures
Administration
Maintenance (including parts)
Capital cost of the equipment
(use Depreciation)
Total cleaning minutes
Total procedure minutes
Sanitation
Utilities
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