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Total budgeted costs
$226,040
$535,000
$851,560
$1,176,100
$2,788,700
Budgeted number of procedures
÷ 3,842
÷ 4,352
÷ 2,924
÷ 2,482
Budgeted cost per service
$ 58.83
$ 122.93
$ 291.23
$ 473.85
* Allocated overhead = Budgeted overhead rate × Technician labor costs
= $1.60 × Technician labor costs
2. Budgeted Information
X-rays
Ultrasound
CT scan
MRI
Total
Number of procedures
3,842
4,352
2,924
2,482
13,600
Cleaning minutes per procedure
×5
×5
×15
×35
Total cleaning minutes
19,210
21,760
43,860
86,870
171,700
Number of procedures
3,842
4,352
2,924
2,482
13,600
Minutes for each procedure
×5
×15
×25
×40
Total procedure minutes
19,210
65,280
73,100
99,280
256,870
Activity
Budgeted Cost
(1)
Cost Driver
(2)
Units of
Cost Driver
(3)
Activity Rate
(4) = (1) ÷ (3)
Administration
$ 20,000
Total number
of procedures
13,600
$1.47059 per procedure
Maintenance
$250,000
Total dollars
of depreciation
$1,600,000
$0.15625 per dollar of depreciation
Sanitation
$252,500
Total cleaning
minutes
171,700
$1.47059 per cleaning minute
Utilities
$151,100
Total procedure
minutes
256,870
$0.588235 per procedure minute
X-rays
Ultrasound
CT Scan
MRI
Total
Technician labor
$ 62,000
$101,000
$155,000
$ 103,000
$ 421,000
Depreciation
42,240
256,000
424,960
876,800
1,600,000
Materials
22,600
16,400
23,600
31,500
94,100
Allocated activity costs:
Administration
($1.47059 × 3,842; 4,352; 2,924;
2,482)
5,650
6,400
4,300
3,650
20,000
Maintenance
$0.15625 × $42,240; $256,000;
424,960; 876,800)
6,600
40,000
66,400
137,000
250,000
Sanitation
($1.47059 × 19,210; 21,760; 43,860;
86,870)
28,250
32,000
64,500
127,750
252,000
Utilities
($0.58862 × 19,210; 65,280; 73,100;
99,280)
11,300
38,400
43,000
58,400
151,100
Total budgeted cost
$178,640
$490,200
$781,760
$1,338,100
$2,788,700
Budgeted number of procedures
÷ 3,842
÷ 4,352
÷ 2,924
÷ 2,482
Budgeted cost per service
$ 46.50
$ 112.64
$ 267.36
$ 539.12
3. Using the disaggregated activity-based costing data, managers can see that the MRI actually
costs substantially more and x-rays, ultrasounds, and CT scans substantially less than the
traditional system indicated. In particular, the MRI activity generates a lot of maintenance activity
and sanitation activity. Managers should examine the use of these two activities to search for ways
to reduce the activity consumption and ultimately its cost.
