Question

Radhika'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 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 disaggregated cost information. She says, "We have state-of-the-art medical imaging technology. Can't we have state-of-the-art accounting technology?" The following budgeted information is available:
RRC operates at capacity. The proposed allocation bases for overhead are as follows:
Administration ........... Number of procedures
Maintenance (including parts) ..... Capital cost of equipment (amortization)
Sanitation ............ Total cleaning minutes
Utilities ............. Total procedure minutes
REQUIRED
1. Calculate the budgeted cost per service for X-rays, ultrasounds, CT scans, and MRIs using the 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 activity-based costing (ABC).
3. Explain how the disaggregation of information could be helpful to RRC's intention to continuously improve its services.


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  • CreatedJuly 31, 2015
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