Med Max buys surgical supplies from a variety of manufacturers and then resells and delivers these supplies to hundreds of hospitals. Med Max 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 Med Max that had cost Med Max $100 to buy from manufacturers, Med Max would charge the hospital $108 to purchase these supplies.

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

Activity Cost Pool Activity Measure Total Cost Total Deliveries

Customer deliveries Number of deliveries $623,000 7,000 deliveries

Manual order processing Number of manual orders $511,000 7,000 orders

Electronic order processing Number of electronic orders $308,000 14,000 orders

Line item picking Number of line items picked $943,000 460,000 line items

Other organization-sustaining costs N/A $640,000

Total selling and administrative expenses $3,025,000

Med Max gathered the data below for two of the many hospitals that it serves- City General and County General (each hospital purchased medical supplies that had cost Med Max $39,000 to buy from its manufacturers):

Activity

Activity Measure City General County General

Number of deliveries 12 25

Number of manual orders 0 41

Number of electronic orders 15 0

Number of line items picked 160 225

Required:

1. Compute the total revenue that Med Max would receive from City General and County General.

Total Revenue

City General:

County General:

2. Compute the activity rate for each activity cost pool. (Round the Line Item picking to 2 decimal places. Omit the $ sign in your response.

Activity Cost Pool Activity Rate

Customer deliveries per delivery

Manual order processing per manual order

Electronic order processing per electronic order

Line item picking per line item picked

3. Compute the total activity costs that would be assigned to City General and County General. (Round your intermediate calculations and final answers to 2 decimal places. Omit the $ sign in your response).

City General (Total Activity Costs):

County General (Total Activity Costs):

4.

Compute Med Max