Question: The MRI department at Community Hospital a large urban health

The MRI department at Community Hospital, a large urban health center, performs magnetic resonance imaging for heart disease, brain disorders, and total body scans for the various patient care units (neurology, cardiovascular, OB/ GYN, oncology, and so forth). The fixed costs of the MRI department (MRI lease, space costs, personnel, overhead, and utilities) are budgeted to be $ 700,000 next year. The variable costs of the MRI department (supplies, fees, maintenance) are budgeted to be $ 300 per MRI hour. (An MRI hour is the total time needed to position the patient, set up the MRI for the scan, perform the scan, remove the patient, and prepare the MRI for the next patient.) The MRI is scheduled in 15- minute blocks. Some simple scans can be performed in 15 minutes, including the time to position the patient, set up the MRI, perform the scan, and prepare the machine for the next patient. Most scans take 30 minutes or 60 minutes. Each patient unit (neurology, cardiovascular, etc.) sending patients for an MRI is charged the expected, not the actual, time of the scan. If a patient requires a 30- minute scan but actually takes 35 minutes, the patient care unit is charged 30 minutes at the predetermined cost per minute. The predetermined cost per minute is calculated at the beginning of the year based on (1) the expected fixed costs, (2) the expected variable cost per minute, and (3) the expected number of minutes from the projected number of scans of various types.
The following table projects the number of various types of scans the MRI Department expects to perform next year.

Scan Types (minutes) Projected Number of Procedures
15............... 500
30............... 1,200
45................. 300
60................. 2,200
90 ................. 150
Total ................. 4,350

At the end of the year the MRI Department performed the following number of scans and the actual time spent on each scan:

The total cost of operating the MRI Department ( fixed and variable costs) was $ 1,750,000.

a. Calculate the predetermined cost per minute of MRI scan time.
b. Based on the predetermined cost per minute calculated in (a), what are the total MRI charges to the patient care units?
c. Prepare a report that analyzes the financial performance of the MRI Department.
d. Write a short report that succinctly summarizes the key findings of your performance analysis in part(c).
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  • CreatedDecember 15, 2014
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