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?" Raynlam's Radiology Center Budgeted Infomation for the Year Ended May 31, 2014 X-rays Ultrasound CT Scan MRI Total Technician labor S 62,000 S101,000 5155.000 $ 103,000 $ 421,000 Depreciation 42.240 256.000 424.960 876,800 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 S126,849 S373,400 $603.560 $1,011,300 $2.782,700 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 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 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. 1. BUDGETED MOH BMOHR MOH ALLOCATED TO 1. X-rays 2. ULTRASOUND 3. CT SCAN 4. MRI CT SCAR MRI Total Ultrasound 5 62,000 42.240 22 600 Technician labor Depreciation Materials Allocated overhead Total budgeted costs Budgeted number of procedures Budgeted cost per service + 3.842 +4352 -2.974 MRI Total 2. Budgeted Information ( TOTAL QUANTITIES OF THE BASE) X-rays Ultrasound CT scas Number of procedures 3,842 Cleaning minutes per procedure x5 Total cleaning minutes 19210 Number of procedures 3,842 Minutes for each procedure x5 Total procedure minutes 19210 65.280 73.100 99.280 256.890 Units of Cost Driver 3) 13.600 Activity Rate $1.47059 per procedures Activity Budgeted Cost Cost Driver (1) (3) Administration $ 20.000 Total number of procedures Maintenance Total dollars of depreciation Sanitation Total cleaning minutes Utilities Total procedure minutes 2 Xur teciler CT SC MRI TEN Eserce Conterrey Forrester, Inc, manufactures ww machines for women. The ignificantly in the complexity and their maiting bech. The following were incurred in 0290 22.00 7 Malah Ativity Admin Maine Antremanfactoring och smpervision that supports direct manufacturing labor, 5435.000 Procurement cost of placing purchase orders, Froning material, and paying supplies related to the sumber of purchase orders place, 5525,000 C. Con of indirect materials, 5160,000 D. Continued to top machines each time different product needs to be manufactured, 365.000 120.2001 Total Budged SING . L. E Designing drawing process chart, and making mgineering process changes for products, 5287,500 Machine-related overhead coach depreciation, maintenance and production engineering, $950,000 (There resources relate to the activity of running the machines) 3. Using the disaggregated activity-based costing managers can see that the MRI actually costs substantially more and X-rays, ultrasounds, and CT scans substantially less than the traditional system indicated in particular, the MRI activity rates a lot of maintenance activity and sanitation activity Managers should examine the use or diese two activities to search for ways to reduce the activity consumption and imately its cost Gant management planten, and planning, 1512,000 Required Clasify each of the preceding costs as output ni-level, watch-level product-ustaining facility