Question

5-36 Department and activity-cost rates, service sector. 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, facility- wide 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?" X-rays Ultrasound CT Scan MRI Total Technician labor $ 74,000 $122,000 $178,000 S 118,000 $ 492,000 Depreciation 45,230 264,320 432,550 895,900 1,638,000 Materials 24,500 21,400 26,300 36,800 109,000 Administration 24,000 Maintenance 275,500 Sanitation 276,200 Utilities 162,300 $143,730 $407,720 $636 850 $1,050,700 $2.977 000 Number of procedures 4,254 4,024 3,344 2,698 Minutes to clean after each procedure 10 15 20 30 Minutes for each procedure 15 20 30 35 VDRC 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 MRI using direct tech- nician 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