Exercise 1 Department and activity-cost rates service sector. 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 technology. Can't we have state-of-the-art accounting technology?" Raynham's Radiology Center Budgeted Information for the Year Ended May 31, 2014 X-rays Ultrasound CT Scan MRI Total Technician labor S 62,000 S101,000 $155,000 S 103,000 $ 421,000 42.240 Depreciation 256,000 424,960 876,800 1,600,000 Materials 22.600 16,400 23,600 31,500 94,100 Administration 20,000 Maintenance 250,000 Sanitation 252,500 Utilities 151,100 S126,840 $373,400 $603,560 $1,011,300 S2.788,700 Number of procedures 3,842 4,352 2,924 2,482 Minutes to clean after each procedure 5 5 15 35 Minutes for each procedure 5 15 25 40 RRC operates at capacity. The proposed allocation bases for overhead are: Administration Maintenance (including parts) Number of procedures Capital cost of the equipment (use Depreciation) Total cleaning ininutes Total procedure minutes Sanitation Utilities Required: 1. Calculate the budgeted cost per service for X-rays, ultrasounds, CT scans, and MRI using direct technician labor costs as the allocation basis. 2. Calculate the budgeted cost per service of X-rays, ultrasounds, CT scans, and MRI 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