Acct434 Advanced Cost Management: Week 1 P5-32 Radhika’s Radiology Center (RRC) performs X-rays

Reminder: Please REWORD/PARAPHRASE written or essay answers to ensure you do not get tagged for PLAGIARISM as we cannot guarantee other buyers have not submitted this tutorial verbatim.

Acct434 Advanced Cost Management
Week 1

5-32. Department and activity-cost rates, service sector.
Radhika’s Radiology Center (RRC) performs x-rays, ultrasounds, CT scans, and MRIs. RRC has developed a reputation as a top Radiology Center in the state. 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 disaggegated cost information. She says, “We have state of the art medical imaging technology. Can’t we have state of the art accounting technology"
Radhika's Radiology Center
Budgeted Information
For the year ended May 30, 2011
X-rays Ultrasound CT scan MRI Total
Technician labor 61,440 105,600 96,000 105,000 368,040
Depreciation 32,240 268,000 439,000 897,500 1,636,740
Materials 22,080 16,500 24,000 31,250 93,830
Administration 20,610
Maintenance 247,320
Sanitation 196,180
Utilities 134,350
$115,760 $390,100 $559,000 $1,033,750 $2,697,070
Number of procedures 3,840 4,400 3,000 2,500
Minutes to clean after each procedure 5 5 15 35
Minutes for each procedure 5 15 20 45

RRC operates at capacity. The proposed allocation bases for overhead are as follows:
Administration Number of procedures
Maintenance (including parts) Capital Cost of the Equipment (use Depreciation)
Sanitation Total cleaning minutes
Utilities Total procedure minutes

1. Calculate the budgeted cost per service for X-rays, Ultrasounds, CT scans, and MRIs using direct technician labor costs as the allocation basis.
2. Calculate the budgeted cost per service of X-rays, Ultrasounds, CT scans, and MRIs if RRC allocated overhead costs using activity-based costing.
3. Explain how the disaggregation of information could be helpful to RRC’s intention to continuously improve their services.
Powered by