Accounting Problem Solving in Excel

Process Costing and Activity Based Costing System (20 Marks)

Technicians at Coastal Radiology Queensland (CRQ) conduct X-rays, ultrasounds, computed tomography (CT scans and magnetic resonance imaging (MRI). The management accountant has gathered the following information in preparation for the budget for the year to 30 June 2019. The costing system that management is using at CRQ has one cost driver, technicians’ remuneration, and costs are calculated per procedure. The management accountant is not sure that the system is reporting sufficiently accurate costs on which to base charges or to monitor performance.

	X-ray	Ultrasound	CT scan	MRI	Indirect cost
Technicians’ remuneration	120000	180000	220000	250000
Depreciation	55000	45000	865000	1650000
Consumables	41500	31500	42000	57000
Administration					380000
Maintenance					565000
Cleaning					454500
Utilities					247000
Number of procedures	3720	4535	2780	3520
Duration of procedure in minutes	5	15	20	25
Post-procedure cleaning time in minutes	5	5	10	15

Required

1. Apply the costing system in use at CRQ to calculate a cost per procedure.

2. Evaluate the costing system as a basis for charging patients and for monitoring performance.

3. Recommend a costing system that is capable of addressing issues raised in your evaluation. Note: apply the system that you have recommended.

4. ‘There’s no reason for me to get excited about the choice between the weighted-average and FIFO methods in my process-costing system. I have long-term contracts with my materials suppliers at fixed prices.’ Do you agree with this statement made by a plant controller? Explain your answer.