Reference no: EM131664092

Question: Department and activity-cost rates, service sector. Raynham's Radiology Center (RRC) performs X-rays, ultrasounds, computer tomography (CT) scans, and magnetic resonance imaging (MRI). RRC has developed a reputation as a top radiology center in the state. RRC has achieved this status because it constantly reexamines its processes and procedures. RRC has been using a single, facility-wide overhead allocation rate. The vice president 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?"

RRC operates at capacity. The proposed allocation bases for overhead are:

Administration                                       Number of procedures

Maintenance (including parts)                  Captial costs 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 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 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 its services.