In the VMD Medical Imaging Center case. $1.$What are the signs of obsolescence of VMD$$s existing accounting system that uses direct labor costs as overhead allocation driver? What is the main assumption if the company uses direct labor hours as the overhead $($indirect$)$ allocation base? Is this assumption valid in this case?

$2.$Calculate the product cost of the four tests in accordance with

The existing costing system

The costing system proposed by Crest, the accountant

The costing system proposed by Posh, the consultant

$3.$Which costing system would you choose? Why?

$4.$Consider VMD$$s recent investment in the $3$D MRI equipment. While this technology allows the Medical Imagining Center to stay at the forefront of technological developments in the field, it is currently underutilized. How would you propose to treat the new equipment from a costing system standpoint?

Let's assume that the operating data of the new $3$D MRI machine is the following:

$$ Initial Cost $=$ $$5,000,000$

$$ Useful life $=10$ years

$$ Residual value $=0$

$$ Overhead costs $($other than depreciation$)$ per year $=$ $$250,000$

$$ Capacity $=2,500$ hours $/$ year

$$ Current utilization $=500$ hours $/$ year

Answer rating: 100% (QA)

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