Department and activity-cost rates, service sector Radhika's Radiology Center (RRC) performs x-rays, ultrasounds, CT scans, and MRls. 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, ?oWe 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 as follows:
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.