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What is the budgeted cost per service for X-rays

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Question - Samir's Sonography Centre (SSC) performs four different procedures: X-rays, ultrasounds, CT scans, and MRIs. They are known for having an excellent reputation for accurate results and client service. They have achieved this level of success through the constant review of their processes and analyzing how to improve their services. They currently use a single, facility-wide overhead allocation rate. The CFO states that they believe they can make some process improvements by allocating costs using an activity-based costing system. The result would be to segregate the administration, maintenance, sanitation and utilities costs. She thinks ABC costing might be the best way to improve their accounting systems.

Use the following budgeted financial information to respond to the questions.

The proposed allocation bases for overhead using the new ABC system are as follows:

REQUIRED -

1. Assume a traditional (simple) costing system that they currently use. What is the budgeted cost per service for X-rays, ultrasounds, CT scans, and MRIs?

2. As per the CFO's proposal, calculate the NEW budgeted cost per service for X-rays, ultrasounds, CT scans, and MRIs if they allocate overhead using an ABC system.

3. How could the new cost allocation be useful for the managers of Samir's Sonography Centre as compared to the old system?

Reference no: EM133004293

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