7. Concorde Medical Imaging (CMI) is a top provider of expensive radiology and nuclear-medicine imaging services. CMI owns stateoftheart medical equipment: CT, MRI, and PET scanners. CMI computes the cost of a patient's scan as the sum of two components: (i) Direct cost. This includes: the costs of the medical technician administering the scan; the costs of the doctor interpreting the scan and writing the report; and the cost of any direct materials. (ii) Overhead allocation. Overhead includes the cost of the equipment; overhead is allocated using direct cost as the allocation base. Although CMI's equipment is currently completely utilized, CMI's top nancial expert is concerned about overcosting and undercosting by the company's reporting system. 7.1. Which of the following is most likely to be the true overcosting / undercosting pattern? A. Relatively lowvolume services are overcosted B. Services using expensive equipment and little technician and doctor time are over-costed C. Services using inexpensive equipment and lots of technician and doctor time are over-costed D. All services are overcosted E. None of the above 7.2. What are the dangers of overcosting / undercosting for CMI? Provide a brief answer. 7.3. CMI's top nancial expert would also like to begin using practical capacity to allocate overhead costs. What is the most likely benet for CMl in using practical capacity? A. This will help reverse the volume bias B. This will help reverse the over-costing / under-costing phenomenon in part 1 of this question C. This will increase all the estimated service costs and thus all the prices CMI charges D. This will help prevent increases in the estimated service costs in case of a drop in demand for CMl's services E. All of the above