15. A hospital pharmacy fills three types of prescriptions. Prescription A requires refrigeration to maintain the drug's activity. Prescription B has potentially fatal interactions with other drugs and therefore requires careful review by a Pharmacist. Prescription C is a basic, common drug that presents negligible risk to the patient. Prescription A is a brand-name drug still on patent, and therefore the charge for the drug is high relative to its cost. Consider the following data for the hospital pharmacy:

Annual Prescription Volume, Total Direct Costs, and Total Charges

Prescription (Rx)APrescription (Rx)BPrescription (Rx)C

Annual volume502001,000

Total direct costs$7,668$48,840$31,300

Total charges$35,000$70,000$50,000

Budgeted Overhead Costs and Activity Date

Cost Driver Consumption

Per One Rx

ActivityAnnualCostsCost DriverRx ARx BRx C

Refrigeration$8,000Number Units100

requiring refrigeration

Materials$24,000Number of feet to drug502010

handlingstorage area

Prescription$90,000Number of Pharmacist15603

reviewminutes

Total costs:$122,000

Questions:

a.Using the cost-to-charges ratio (CCR) method, determine the overhead that would be allocated to each type of prescription A, B, and C.

continued

b.Determine the total cost (Direct and Indirect cost) of filling one of each type of prescription if overhead is allocated using CCR.

c.Using ABC techniques, determine the allocation rate for each overhead activity and determine the overhead that would be allocated to each type of prescription, A, B and C.

d.Determine the total cost (Direct cost and Indirect cost) of filling one of each type of prescription if overhead is allocated using ABC techniques.

e.Explain the reasons for the difference in the full cost of each prescription in parts b and d.

I mainly just need letter E