The East State Veterinary Clinic provides veterinary services for small domestic animals. Three certified veterinarians and four technical assistants work at the clinic. The clinic has three separate areas of operations: examinations, surgeries, and laboratory tests. The technical assistants help with exams and surgery and perform the majority of laboratory tests.

The clinic allocates administrative and operating overhead to the three service areas using a single rate based on the veterinarians' direct labor hours. Information about services and costs for the past fiscal quarter are as follows:

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A. Calculate the clinic's predetermined overhead rate based on the activity in the most recent quarter, and use that rate to allocate costs to each service area.
B. How does the use of a single activity base and rate disproportionately allocate costs among the three service areas? Explain your answer.
C. Calculate separate overhead rates for each of the three service areas using the veterinarians' direct labor hours incurred in each area as the activity base. Why do the rates differ for each service area? Calculate the overhead cost (rounded to the nearest dollar) that would have been allocated to each area using the three separate rates.

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Area of Operations Examinations Surgeries Laboratory tests Total Veterinarians' Direct Labor Hours Number of Patients 1,200 800 200 60 100 600 1.500 Overhead Item Maintenance and supplies, exam rooms Depreciation, surgical equipment Cost $ 8.500 6,000 Surgical supplies 2.000 Depreciation, laboratory equipment 2.000 Laboratory supplies 4,000 Total $22,500