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Exercise 7-10 (Algo) Customer Profitability Analysis [LO7-3, LO7-4, LO7-5] Worley Company buys surgical supplies from a varlety of manufacturers and then resells and delivers these
Exercise 7-10 (Algo) Customer Profitability Analysis [LO7-3, LO7-4, LO7-5] Worley Company buys surgical supplies from a varlety of manufacturers and then resells and delivers these supplies to hundreds of hospltals. Worley sets its prices for all hospitals by marking up Its cost of goods sold to those hospltals by 6%. For example, If a hospltal buys supplies from Worley that cost Worley $100 to buy from manufacturers, Worley would charge the hospltal $106 to purchase these supplies. For years, Worley believed the 6% markup covered its selling and admInIstratlve expenses and provided a reasonable profit. However, In the face of declining profits, Worley decided to Implement an actlvity-based costing system to Improve Its understanding of customer profitability. The company broke Its selling and administratlve expenses Into five activitles as shown: Worley gathered the data below for two of the many hospltals it serves-Unlversity and Memorlal (each hospltal purchased medical supplies that cost Worley $31,000 to buy from manufacturers): Required: 1. Compute the total revenue Worley would recelve from Universlty and Memorlal. 2. Compute the actlvity rate for each actlvity cost pool. 3. Compute the total actlvity costs assigned to Unlversity and Memorlal. 4. Compute Worley's customer margin for University and Memorlal. (Hint. Do not overlook the $31,000 cost of goods sold that Worley Incurred serving each hospltal.) Complete this question by entering your answers in the tabs below. Compute the activity rate for each activity cost pool. Note: Round your answers to 2 decimal places
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