Roxbury's Radiology Center (RRC) performs X-rays, ultrasounds, CT scans, and MRIs. 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 VP 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?"

RRC operates at capacity. The proposed allocation bases for overhead are as follows:
Administration..........................................................Number of procedures
Maintenance (including parts).........Capital cost of the equipment (use Depreciation)
Sanitation................................................................Total cleaning minutes
Utilities.................................................................Total procedure minutes
Required
1. Calculate the budgeted cost per service for X-rays, Ultrasounds, CT scans, and MRIs using direct technician labor costs as the allocation basis.
2. Calculate the budgeted cost per service of X-rays, Ultrasounds, CT scans, and MRIs 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.

Transcribed Image Text:

Roxbury's Radiology Center Budgeted Information For the Year Ended May 30, 2011 CT scan Total X-rays 64,000 136,800 22,400 Ultrasound MRI Technician labor Depreciation Materials Administration Maintenance Sanitation Utilities $104,000 $119,000 S106,000 $ 393,000 400,200 792,000 1560,000 30,800 93,600 19,000 260,000 267,900 121,200 $223,200 $351,500 543,100 S928,800 $2,714,700 231,000 16,500 23,900 Number of procedures Minutes to clean after each procedure Minutes for each procedure 2,555 10 4,760 10 20 3,290 20 2,695 40 40