Exercise 7-10 (Static) Customer Profitability Analysis [LO73, LO7-4, LO7-5] 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 5%. For example, if a hospital buys supplies from Worley that cost Worley $100 to buy from manufacturers, Worley would charge the hospital $105 to purchase these supplies. For years. Worley believed the 5% 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 protability. The company broke its selling and administrative expenses into ve activities as shown: Activity Cost Pool (Activity Measure) Total Cost Total Activity Customer deliveries (Number of deliveries) $ 500,000 5,000 deliveries Manual order processing (Number of manual orders) 248,000 4,000 orders Electronic order processing (Number of electronic orders) 200,000 12,500 orders Line item picking (Number of line items picked) 450,000 450,000 line items Other organization-sustaining costs (None) 602,000 Total selling and administrative expenses $ 2,000,000 Worley gathered the data below for two of the many hospitals it servesUniversity and Memorial (each hospital purchased medical supplies that cost Worley $30,000 to buy from manufacturers): Activity Activity Measure University Memorial Number of deliveries 10 25 Number of manual orders 0 30 Number of electronic orders 15 0 Number of line items picked 120 250 Required: 1. Compute the total revenue Worley would receive from University and Memorial. 2. Compute the activity rate for each activity cost pool. 3. Compute the total activity costs assigned to University and Memorial. 4. Compute Worley's customer margin for University and Memorial. (Hint: Do not overlook the $30,000 cost of goods sold that Worley incurred serving each hospital.) Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Compute the total revenue Worley would receive from University and Memorial. U n iversiiy Required 2 > Complete this questiun by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Compute the activity rate for each activity cost pool. Customer deliveries per delivery Manual order processing per manual order Electronic order processing per electronic order Line item picking per line item picked Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Compute Worley's customer margin for University and Memorial. (Hint: Do not overlook the $30,000 cost of goods sold that Worley incurred serving each hospital.) Note: Loss amounts should be indicated with a minus sign. U n iversity