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Codrington Company buys medical supplies from a variety of manufacturers and then resells and delivers these supplies to hundreds of hospitals. Codrington sets its
Codrington Company buys medical supplies from a variety of manufacturers and then resells and delivers these supplies to hundreds of hospitals. Codrington sets its prices for all hospitals by marking up its cost of goods sold to those hospitals by 15%. Recently, Codrington decided to implement activity-based costing to improve its understanding of customer profitability. Activity Cost Pool (Activity Measure) Customer deliveries (# of deliveries) Total Cost Total Activity $750,000 2,500 Manual order processing (# of manual orders) 330,000 5,000 Electronic order processing (# of electronic orders) 252,000 14,000 Line item picking (# of line items picked) 950,000 475,000 The data below is for two of the many hospitals that it serves, Steele and Johnson (both hospitals purchased medical supplies that had cost Codrington $40,000 to buy from manufacturers): Activity Activity Measure Steele Johnson # of deliveries 8 20 20 # of manual orders 0 # of electronic orders 35 55 25 25 0 # of line items picked 140 300 Compute the customer margin for Steele
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