Pharmacare Inc. specializes in the distribution of pharmaceutical products. Pharmacare operates at capacity and has three main market segments:

a. General supermarket chains

b. Drugstore chains

c. "Mom and Pop" single-store pharmacies Rick Flair, the new controller of Pharmacare, reported the following data for August 2015:

For many years, Pharmacare has used gross margin percentage [(Revenue − Cost of goods sold) ÷ Revenue] to evaluate the relative profitability of its different groupings of customers (distribution outlets).
Flair recently attended a seminar on activity-based costing (ABC) and decides to consider using it at Pharmacare. Flair meets with all the key managers and many staff members. People generally agree that there are five key activity areas at Pharmacare:
Activity AreaCost Driver
Order processing....................Number of customer purchase orders
Line-item processing.......Number of line items ordered by customers
Delivering to stores.............................Number of store deliveries
Cartons shipped to store.......................Number of cartons shipped
Stocking of customer store shelves...............Hours of shelf-stocking
Each customer order consists of one or more line items. A line item represents a single product (such as Extra-Strength Tylenol Tablets). Each product line item is delivered in one or more separate cartons. Each store delivery entails the delivery of one or more cartons of products to a customer. Pharmacare's staff stacks cartons directly onto display shelves in customers' stores. Currently, there is no additional charge to the customer for shelf-stocking, and not all customers use Pharmacare for this activity. The level of each activity in the three market segments and the total cost incurred for each activity in 2015 are shown below:

Required
1. Compute the August 2015 gross margin percentage for each of Pharmacare's three market segments.
2. Compute the August 2015 per-unit cost driver rate for each of the five activity areas.
3. Use the activity-based costing (ABC) information to allocate the $301,080 of "other operating costs" to each of the market segments. Compute the operating income for each market segment.
4. Comment on the results. What new insights are available with the activity-based information?

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General Supermarket Chains S3,708,000 3,600,000 S 108,000 Drugstore Mom and Pop Chains $3,150,000 3,000,000 150,000 Single Stores Pharmac are Revenues Cost of goods sold Gross margin Other operating costs Operating income $1,980,000 1,800,000 180,000 S8,838,000 8,400,000 438,000 301,080 S 136,920 Mom and Total Cost General Chains 140 1,960 120 36,000 360 Supermarket Drugstore Pop" Single Activity Activity Number of orders processed Number of line items ordered Number of store deliveries made Number of cartons shipped to stores Shelf stocking (hours) Chains 360 4,320 360 24,000 180 Stores 1,500 15,000 1,000 16,000 100 in 2015 S80,000 63,840 71,000 76,000 10,240