Radhika's Radiology Centre (RRC) performs X-rays, ultrasounds, CT scans, and MRIs. RRC has developed a reputation as
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.
Step by Step Answer:
Cost Accounting A Managerial Emphasis
ISBN: 978-0133392883
6th Canadian edition
Authors: Horngren, Srikant Datar, George Foster, Madhav Rajan, Christ