Raynhams Radiology Center (RRC) performs X-rays, ultrasounds, computer tomography (CT) scans, and magnetic resonance imaging (MRI). RRC

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?”

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 itsservices.

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Raynhams Radiology Center Budgeted Information for the Year Ended May 31, 2014 X-rays Ultrasound CT Scan MRI Total Technician labor Depreciation Materials Administration Maintenance Sanitation Utilities $62,000 $101,000 $155,000 $ 103, $421,000 2,240 256,000 424,960 876,800 1,600,000 22,600 16,400 23600 31,500 94,100 20,000 250,000 252,500 151,100 S126840 $373,400 $803,560 S1,011,300 $2,788,700 Number of procedures Minutes to clean after each procedure Minutes for each procedure 3842 4352 2,924 2,482 35 40 15 25 15