Department and activity-cost rates, service sector Radhika’s Radiology Center (RRC) performs x-rays, ultrasounds, CT scans, and MRls. RRC has developed a reputation as a top Radiology Center in the state. RRC has achieved this status because it constantly re-examines 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 disaggegated cost information. She says, “We have state of the art medical imaging technology. Can’t we have state of the art accounting technology?”

RRC operates at capacity. The proposed allocation bases for overhead are as follows:

1. Calculate the budgeted cost per service for X-rays, Ultrasounds, CT scans, and MRIs using direct technician labor costs as the allocation basis.

2. Calculate the budgeted cost per service of X-rays, Ultrasounds, CT scans, and MRIs 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 their services.

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Radhika's Radiology Center Budgeted Information For the year ended May 30, 2011 Х-гаys S 61,440 CT scan S 96,000 MRI Total Ultrasound Technician labor $105,600 S 368,040 1,636,740 S105,000 Depreciation 32,240 268,000 439,000 897,500 24,000 31,250 Materials 22,080 16,500 93,830 Administration 20,610 247,320 Maintenance 196,180 134,350 $1,033,750 $2,697,070 Sanitation Utilities $115,760 $390,100 $559,000 Number of procedures Minutes to clean after each procedure Minutes for each procedure 2,500 3,840 4,400 3,000 15 35 20 45 15