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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.