Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Check my workCheck My Work button is now enabled1 Item 2 Med Max buys surgical supplies from a variety of manufacturers and then resells and

Check my workCheck My Work button is now enabled1

Item 2

Med Max buys surgical supplies from a variety of manufacturers and then resells and delivers these supplies to dozens of hospitals. In the face of declining profits, Med Max decided to implement an activity-based costing system to improve its understanding of the costs incurred to serve each hospital. The company broke its selling and administrative expenses into four activities as shown below:

Activity Cost Pool Activity Measure Total Cost Total Activity
Customer deliveries Number of deliveries $ 453,600 5,400 deliveries
Manual order processing Number of manual orders 347,600 4,400 orders
Electronic order processing Number of electronic orders 211,560 12,900 orders
Line item picking Number of line items picked 638,000 440,000 line items
Total selling and administrative expenses $ 1,650,760

Med Max gathered the data below for two of the many hospitals that it servesCity General and County General:

Activity
Activity Measure City General County General
Number of deliveries 15 30
Number of manual orders 0 60
Number of electronic orders 15 0
Number of line items picked 140 300

Required:

1. Compute the activity rate for each activity cost pool.

2. Compute the total activity costs that would be assigned to City General and County General.

Compute the activity rate for each activity cost pool. (Round your answers to 2 decimal places.)

Activity Cost Pool Activity Rate
Customer deliveries per delivery
Manual order processing per manual order
Electronic order processing per electronic order
Line item picking

per line item picked

Compute the total activity costs that would be assigned to City General and County General. (Do not round intermediate calculations.)

ABC Cost
Activity Cost Pool City General County General
Customer deliveries
Manual order processing
Electronic order processing
Line item picking
Total activity costs $ $

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Principles of Financial Accounting

Authors: Belverd E. Needles, Marian Powers

12th edition

978-1133940562, 1133940560, 978-1285608464, 1285608461, 1133939287, 978-0357693605, 978-1285607047, 128560704X, 978-1133939283

More Books

Students also viewed these Accounting questions