Department and activity-cost rates, service sector. Roxbury’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 reexamines 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 disaggregated cost information. She says, “We have state of the art medical imaging technology. Can’t we have state of the art accounting technology?”

Roxbury’s Radiology Center Budgeted Information For the Year Ended May 30, 2011
	X-rays	Ultrasound	CT scan	MRI	Total
Technician labor	$ 64,000	$104,000	$119,000	$106,000	$ 393,000
Depreciation	136,800	231,000	400,200	792,000	1560,000
Materials	22,400	16,500	23,900	30,800	93,600
Administration					19,000
Maintenance					260,000
Sanitation					267,900
Utilities					121,200
	$223,200	$351,500	$543,100	$928,800	$2,714,700
Number of procedures	2,555	4,760	3,290	2,695
Minutes to clean after each procedure	10	10	20	40
Minutes for each procedure	5	20	15	40

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 its services.