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Part 1 Rashaad's Radiology Centre (RRC) performs X-rays, ultrasounds, CT scans, and MRIs. RRC has developed a reputation as a top radiology centre in the

Part 1

Rashaad's Radiology Centre (RRC) performs X-rays, ultrasounds, CT scans, and MRIs. RRC has developed a reputation as a top radiology centre in the area. 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?"

1.

Calculate the budgeted cost per service for X-rays, ultrasounds, CT scans, and MRIs using direct technician labour as the cost allocation base.

2.

Calculate the budgeted cost per service for X-rays, ultrasounds, CT scans, and MRIs if RRC allocated overhead costs using ABC.

3.

Explain how the disaggregation of information could be helpful to RRC's intention to continuously improve its services.

The following budgeted information is available

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Requirement 1. Calculate the budgeted cost per service for X-rays, ultrasounds, CT scans, and MRIs using direct technician labour costs as the allocation base.

Determine the formula to calculate the overhead costs allocated to each service. Next, calculate the indirect costs allocated to each service. (Do not round until the final amount; then round the costs allocated to the nearest whole number.)

Budgeted overhead rate

x

(

/

) =

Indirect costs allocated to service

Part 2

X-Rays

x

(

/

) =

Part 3

Ultrasound

x

(

/

) =

Part 4

CT Scan

x

(

/

) =

Part 5

MRI

x

(

/

) =

Part 6

Now calculate the total budgeted costs for each service using direct technician labour costs as the allocation basis. Then, calculate the budgeted cost per service. (Round the budgeted cost per service to the nearest cent.)

X-Rays

Ultrasound

CT Scan

MRI

Technician labour

$65,000

$105,500

$97,000

$110,000

Depreciation

32,600

266,000

443,000

893,000

Materials

21,800

16,500

23,900

30,700

Indirect costs

Total budgeted costs

Part 7

Budgeted cost per service

Part 8

Requirement 2. Calculate the budgeted cost per service of X-rays, ultrasounds, CT scans, and MRIs if RRC allocated overhead costs using ABC.

Begin by determining the formula you will use to allocate administration costs.

Activity rate

x

(

/

) = Administration costs allocated

Part 9

Next, determine the formula you will use to allocate maintenance costs.

x

(

/

) = Maintenance costs allocated

Part 10

Now determine the formula you will use to allocate sanitation costs.

x (

/

) =

Sanitation costs allocated

Part 11

Next, determine the formula you will use to allocate utility costs.

x (

/

) = Utility costs allocated

Part 12

Calculate the budgeted cost for each service using activity-based costing. Use the formulas you determined above in your calculations. (Hold all decimals in interim calculations. Round final answers to the nearest whole dollar.)

X-Rays

Ultrasound

CT Scan

MRI

Technician labour

$65,000

$105,500

$97,000

$110,000

Depreciation

32,600

266,000

443,000

893,000

Materials

21,800

16,500

23,900

30,700

Administration

Part 13

Maintenance

Part 14

Sanitation

Part 15

Utilities

Part 16

Total

Part 17

Now calculate the budgeted cost per service. (Round the cost per service to the nearest cent.)

X-Rays

Ultrasound

CT Scan

MRI

Budgeted cost per service

Part 18

Requirement 3. Explain how the disaggregation of information could be helpful to RRC's intention to continuously improve its services.

Using the disaggregated activity-based costing data, managers can see that

CT scans

MRIs

ultrasounds

x-rays

cost substantially more and

CT scan and MRI

MRI and ultrasounds

MRI and x-rays

x-rays and ultrasounds

substantially less than the traditional system indicated. In particular, a(n)

CT scan

MRI

ultrasound

x-ray

activity generates a lot of maintenance activity and sanitation activity. Managers should examine the use of these two activities to search for ways to

increase

reduce

the activity consumption and ultimately its

cost.

productivity.

please complete all the part

Budgeted information Additional information

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