Exercise $7-10($Algo$)$ Customer Profitability Analysis $[$LO$7-3,$ LO$7-4,$ LO$7-5]$

Worley Company buys surgical supplies from a variety of manufacturers and then resells and delivers these supplies to hundreds of hospitals. Worley sets its prices for all hospitals by marking up its cost of goods sold to those hospitals by $8\%.$ For example, if a hospital buys supplies from Worley that cost Worley $$100$ to buy from manufacturers, Worley would charge the hospital $$108$ to purchase these supplies.

For years, Worley believed the $8\%$ markup covered its selling and administrative expenses and provided a reasonable profit. However, in the face of declining profits, Worley decided to implement an activity$-$based costing system to improve its understanding of customer profitability. The company broke its selling and administrative expenses into five activities as shown:

$\backslash$table$[[$Activity Cost Pool $($Activity Measure$),$Total Cost,Total Activity$],[\backslash$table$[[$Customer deliveries $($Number of$],[$deliveries$)]],$$$504,000,6,000$ deliveries$],[\backslash$table$[[$Manual order processing $($Number of manual$],[$orders$)]],608,000,8,000$ orders$],[\backslash$table$[[$Electronic order processing $($Number of$],[$electronic orders$)]],231,000,11,000$ orders$],[\backslash$table$[[$Line item picking $($Number of line items$],[$picked$)]],819,000,420,000$ line items$],[\backslash$table$[[$Other organization$-$sustaining costs$],[($None$)]],620,000,],[$Total selling and a$,2,782,{000}^{\text{\$}},]]$

Worley gathered the data below for two of the many hospitals it serves$-$University and Memorial $($each hospital purchased medical supplies that cost Worley $$32,000$ to buy from manufacturers$)$:

$\backslash$table$[[,$Activity$],[$Activity Measure,$14,25],[$Number of deliveries,$0,48],[$Number of manual orders,$14,0],[\backslash$table$[[$Number of electronic$],[$orders$]],150,280],[\backslash$table$[[$Number of line items$],[$picked$]],,]]$

Required:

Compute the total revenue Worley would receive from University and Memorial.

Compute the activity rate for each activity cost pool.

Compute the total activity costs assigned to University and Memorial.

Compute Worley's customer margin for University and Memorial. $($Hint$.$ Do not overlook the $$32,000$ cost of goods sold that Worley incurred serving each hospital.$)$

Complete this question by entering your answers in the tabs below.

$\backslash$table$[[$Required$,$Required,Required,Required$],[1,2,3,4]]$

Compute the total revenue Worley would receive from University and Memorial.

$\backslash$table$[[,\backslash$table$[[$Total$],[$Revenue$]]],[$University$,],[$Memorial$,]]$