Vital Dimension’s Radiology Center (VDRC) performs X-rays, ultrasounds, computer tomography (CT) scans, and magnetic resonance imaging (MRI).

VDRC has developed a reputation as a top radiology center in the state. VDRC has achieved this status because it constantly reexamines its processes and procedures. VDRC has been using a single, facilitywide overhead allocation rate. The vice president of finance believes that VDRC 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?”

VDRC 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 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 VDRC allocated overhead costs using activity-based costing.
3. Explain how the disaggregation of information could be helpful to VDRC’s intention to continuously improve its services.

Transcribed Image Text:

X-rays Ultrasound CT Scan MRI Total Technician labor Depreciation Materials Administration $ 74,000 $122,000 $178,000 $ 118,000 $492,000 45,230 264,320 432,550 895,900 1,638,000 24,500 21,400 26,300 36,800 109,000 24,000 Maintenance 275,500 Sanitation 276,200 Utilities 162,300 $143,730 $407,720 $636,850 $1,050,700 $2,977,000 Number of procedures 4,254 4,024 3,344 2,698 Minutes to clean after each procedure 10 Minutes for each procedure 15 225 15 20 20 20 30 30 30 35