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Exercise 4-9 Compute and Use Activity Rates to Determine the Costs of Serving Customers (L04-2, LO4-3] Med Max buys surgical supplies from a variety of
Exercise 4-9 Compute and Use Activity Rates to Determine the Costs of Serving Customers (L04-2, LO4-3] 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 Customer deliveries Manual order processing Electronic order processing Line item picking Total selling and administrative expenses Activity Measure Number of deliveries Number of manual orders Number of electronic orders Number of line items picked Total Cost $ 361,900 266,400 191,540 518,000 $ 1,337,840 Total Activity 4,700 deliveries 3,700 orders 12,200 orders 370,000 line items Med Max gathered the data below for two of the many hospitals that it servesCity General and County General: Activity City County General General 15 60 20 130 Activity Measure Number of deliveries Number of manual orders Number of electronic orders Number of line items picked 30 290 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. Required 1 Required 2 Compute the activity rate for each activity cost pool. (Round your answers to 2 decimal places.) Activity Cost Pool Customer deliveries Manual order processing Electronic order processing Line item picking Activity Rate per delivery per manual order per electronic order per line item picked ABC Cost City County General General Activity Cost Pool Customer deliveries Manual order processing Electronic order processing Line item picking Total activity costs
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