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    Cost allocation

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    MRI at Memorial Hospital has the following projected operating data for next year.

    Fixed costs Variable costs Total costs

    Equipment lease $350,000 $350,000
    Supplies $97,000 $97,000
    Labor $145,000 $182,000 $327,000
    Hospital Admin $63,000 $63,000
    Occupancy $48,000 $48,000

    Total Projected cost $606,000 $279,000 $885,000
    Number of images 33,600
    Number of hours 2,800

    Typical elderly patients requires one hour of MR time to produce the 10 MRI images, other patients only require about 45 minutes to produce 10 MRI images

    a. calculate projected cost per MRI image
    Answer: Cost per MRI Image = 279000/33600 = $8.30

    b. calculate projected cost per hour of MRI time
    Answer: Cost per hour MRI time = 279000/2800 = $99.64

    c. if typical elderly patients requires one hour of MR time to produce the 10 MRI images, calculate MRI costs based on cost per image basis
    Answer: MRI costs based on cost per image basis = 8.30*10 = $83.00

    d. if typical elderly patients requires one hour of MR time to produce the 10 MRI images, calculate MRI costs based on cost per hour of MRI time
    Answer: MRI costs based on cost per hour of MRI time = 99.64*1 = $99.64

    e. should the hospital calculate the cost based on per image or per MRI hour? Explain why?
    Answer: The hospital should calculate based on per MRI hour basis. The primary reason is MRI is required by more elderly patients than others. The hospital should be able to tell whether it expect to receive which patients more and decide accordingly.

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    https://brainmass.com/business/management-accounting/cost-allocation-mri-images-393687

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    Solution Preview

    Check the attached sheet.

    MRI at Memorial Hospital has the following projected operating data for next year.

    Fixed costs Variable costs Total costs

    Equipment lease $350,000 $350,000
    Supplies $97,000 $97,000
    Labor $145,000 $182,000 $327,000
    Hospital Admin $63,000 $63,000
    Occupancy $48,000 $48,000

    Total Projected ...

    Solution Summary

    The solution computes projected cost per MRI image, projected cost per hour of MRI time, MRI costs based on cost per image basis for eldely patients, MRI costs based on cost per hour of MRI time for eldely patients.

    $2.19

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