For years, Worley believed that the 5% markup covered its selling and admi at the 5% markup covered its selling and administrative expenses and provided a reasonable profit. However, in the face of declining profits Worley acco ver, in the face of declining profits Worley decided to imple- ment an activity-based costing system to help improve its understanding of customer pro d u somer profitability The company broke its selling and administrative expenses into five activities as shown Total Cost $ 500,000 248,000 Total Activity 5,000 deliveries 4,000 orders Activity Cost Pool (Activity Measure) Customer deliveries (Number of deliveries) Manual order processing (Number of manual orders)..... Electronic order processing (Number of electronic orders)...... Line item picking (Number of line items picked) ........ Other organization-sustaining costs (None)... Total selling and administrative expenses .. . 12.500 orders 450.000 line items 200,000 450,000 602.000 $2,000,000 Worley gathered the data below for two of the many hospitals that it serves-University and Memorial (each hospital purchased medical supplies that had cost Worley $30,000 to buy from manufacturers): Activity Activity Measure University Memorial Number of deliveries ............ Number of manual orders ........... Number of electronic orders ........ Number of line items picked ........... 0 15 120 25 30 o 250 Required: 1. Compute the total revenue that Worley would receive from University and Memorial. 2. Compute the activity rate for each activity cost pool. 3. Compute the total activity costs that would be 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.) 5 Describe the purchasing behaviors that are likely to characterize Worley's least profitable customers