Drs. Alpha and Beta are partners in an orthopedic clinic located in suburban Detroit. Recently, the clinic acquired an X-ray machine. The two physicians have approached you for help in equitably allocating the machine's cost among them. They provide you with the following expected and actual usage data:

They also inform you that the actual X-ray machine variable costs for March were $10,720, $1,120 higher than the expected variable costs of $9,600, or $20 per exposure. The expected and actual X-ray machine fixed costs for March were $7,500 and $8,000, respectively.
Required:
a. Determine the cost allocated to each physician under the following schemes:
• Total actual costs allocated in proportion to actual use.
• Total expected costs (per a flexible budget) allocated in proportion to budgeted use.
• Expected fixed costs allocated in proportion to expected use, expected variable costs allocated in proportion to actual use.
b. Which of the above allocations do you think is most equitable? Why?

Transcribed Image Text:

Dr. Alpha Dr. Beta Expected use per month ures 200 exposures Actual use for March 240 exposures 240 exposures