Vital Dimensions Radiology Center (VDRC) performs X-rays, ultrasounds, computer tomography (CT) scans, and magnetic resonance imaging (MRI).
Question:
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.
Step by Step Answer:
Horngrens Cost Accounting A Managerial Emphasis
ISBN: 9781292211541
16th Global Edition
Authors: Srikant Datar, Madhav Rajan