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 9%. 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 $109 to purchase these supplies. For years, Med Max believed that the 9% 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 Activity Customer deliveries Number of deliveries $ 616,000 7,000 deliveries Manual order processing Number of manual orders 420,000 6,000 orders Electronic order processing Number of electronic orders 273,000 13,000 orders Line item picking Number of line items picked 857,500 490,000 line items Other organization-sustaining costs NA 690,000 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Total selling and administrative expenses $ 2,856,500 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Med Max gathered the data below for two of the many hospitals that it serves