PURPOSE: To get an informative and detailed picture of the resource utilization in a radiology department in order to support its pricing and management. MATERIAL AND METHODS: A system based mainly on the theoretical foundations of activity-based costing (ABC) was designed, tested and compared with conventional costing. The study was performed at the Pediatric Unit of the Department of Radiology, Oulu University Hospital. The material consisted of all the 7,452 radiological procedures done in the unit during the first half of 1994, when both methods of costing where in use. Detailed cost data were obtained from the hospital financial and personnel systems and then related to activity data captured in the radiology information system. RESULTS: The allocation of overhead costs was greatly reduced by the introduction of ABC compared to conventional costing. The overhead cost as a percentage of total costs dropped to one-fourth of total costs, from 57% to 16%. The change of unit costs of radiological procedures varied from -42% to +82%. CONCLUSION: Costing is much more detailed and precise, and the percentage of unspecified allocated overhead costs diminishes drastically when ABC is used. The new information enhances effective departmental management, as the whole process of radiological procedures is identifiable by single activities, amenable to corrective actions and process improvement.