1. What are the signs of obsolescence in the existing costing system?

2. Calculate the produce cost for each of the four tests based on:
a. The existing system
b. The system proposed by Crest, the accountant
c. The system proposed by Posh, the consultant
3. Which costing system would you choose? Why?

Revenues $ 3,520,018
Direct Labour (DL) $ 1,375,571
Overhead $ 1,982,428
Total Expenses $ 3,357,999
Profit $ 162,019

Burden Rate
Overhead $ 1,982,428
Direct Labour (DL) $ 1,375,571
Burden Rate 144.12%

A. Existing system: Overhead as a function of DL using burden rate

DL Breakdown Overhead Total Cost
Projectional Radiographs $ 417,073 $ 601,072 $ 1,018,145
Fluoroscopies $ 414,047 $ 596,711 $ 1,010,758
CAT Scan $ 270,850 $ 390,340 $ 661,190
MRI Scan $ 273,601 $ 394,305 $ 667,906
Total DL Costs $ 1,375,571 $ 1,982,428 $ 3,357,999
Burden Rate 144.12%

B. Crest - Equiment related Overhead

Breakdown of Overhead Expenses

DL Related Overhead $ 721,392
Equipment Related Overhead
$ 1,261,036
Total Overhead $ 1,982,428

Utilization of equipment byHours

test
Projectional Radiographs 1,060 $ 212,816.14
Fluoroscopies 1,312 $ 263,410.16
CAT Scan 1,394 $ 279,873.30
MRI Scan 2,515 $ 504,936.40
Total Equip Related Overhead 6,281 $ 1,261,036

DL Breakdown Overhead (DL) Overhead (Equip)

Projectional Radiographs $ 417,073 $ 218,726 $ 212,816
Fluoroscopies $ 414,047 $ 217,139 $ 263,410
CAT Scan $ 270,850 $ 142,042 $ 279,873
MRI Scan $ 273,601 $ 143,485 $ 504,936
Total DL Costs $ 1,375,571 $ 721,392 $ 1,261,036

C. Additional breakdowns of overhead into high tech / low tech

Breakdown of Equip Overhead

High tech equipment $ 921,793
Low tech equipment $ 339,243
Total equip related $ 1,261,036

Utilization of high/low tech by test

DL Breakdown Overhead (DL) High Tech (hours)
Projectional Radiographs $ 417,073 $ 218,726 268
Fluoroscopies $ 414,047 $ 217,139 579
CAT Scan $ 270,850 $ 142,042 819
MRI Scan $ 273,601 $ 143,485 2,515
Total utilization $ 1,375,571 $ 721,392 4,181
 g costing system?
ests based on:

Total Cost
$ 848,615
$ 894,596
$ 692,765
$ 922,022
$ 3,357,999

High Tech ($) Low tech (hours) Low tech ($) Total Cost
$ 59,086.47 792 $ 127,943.07 $ 822,829 103%
$ 127,653.23 733 $ 118,411.96 $ 877,251 102%
$ 180,566.48 575 $ 92,887.96 $ 686,347 101%
$ 554,486.82 0 $ - $ 971,573 95%
$ 921,793.00 2,100 $ 339,243.00 $ 3,357,999