230 CHAPTER4 E4-34B Compare traditional and ABC cost allocations at a pharmacy Learning Objective 2) Gracen Pharmacy, part of a large chain of pharmacies, fills a variety of prescriptions for customers. The complexity of prescriptions filled by Gracen varies widely, pharmacists can spend between five minutes and six hours on a prescription order. Traditionally, the pharmacy has allocated its overhead based on the number of prescriptions better allocate the pharmacy overhead costs to pharmacy orders. The controller has gath- ered the following information The pharmacy chain's controller is exploring whether activity-based costing (ABC) may Total Annual Estimated Cost Driver Activity 90,000 Total Annual Estimated Cost Cost Driver Cost Pools Technician hours .. Pharmacy occupancy costs (utilities 5 36,000 rent, and other costs) Packaging supplies (bottles, bags Number of prescription 23,000 39.100 and other packaging) Professional training and insurance conts Total pharmacy overhead 25,000 125.00 Pharmacist hours $ 200.100 The dlerk for Gracen Pharmacy has gathered the following information regarding two recent pharmacy orders Customer Order 1102 Technician Hours 0.5 0.5 Number of Prescriptions Pharmacist 2.0 2.5 Requirements 1. What is the traditional overhead rate based on the num 2. How much pharmacy overhead would be allocated to customer order number 1102 if ber of prescriptions? traditional overhead allocation based on the number of prescriptions is used? 3. How much pharmacy overhead would be allocated to customer order number 1103 if traditional overhead allocation based on the number of prescriptions is used? 4. What are the following cost pool allocation rates? a. Pharmacy occupancy costs b. Packing supplies c Professional training and insurance costs 5. How much would be allocated to customer order number 1102 if activity-based 6. How much would be allocated to customer order number 1103 if activity-based 7. Which allocation method (traditional or activity-based costing) would produce a more costing (ABC) is used to allocate the pharmacy overhead costs? costing (ABC) is used to allocate the pharmacy overhead costs? accurate product cost? Explain your