Question
Med Max buys surgical supplies from a variety of manufacturers and then resells and delivers these supplies to dozens of hospitals. In the face of
Med Max buys surgical supplies from a variety of manufacturers and then resells and delivers these supplies to dozens of hospitals. In the face of declining profits, Med Max decided to implement an activity-based costing system to improve its understanding of the costs incurred to serve each hospital. The company broke its selling and administrative expenses into four activities as shown below: Activity Cost Pool Activity Measure Total Cost Total Activity Customer deliveries Number of deliveries $ 426,400 5,200 deliveries Manual order processing Number of manual orders 323,400 4,200 orders Electronic order processing Number of electronic orders 205,740 12,700 orders Line item picking Number of line items picked 567,000 420,000 line items Total selling and administrative expenses $ 1,522,540 Med Max gathered the data below for two of the many hospitals that it servesCity General and County General: Activity Activity Measure City General County General Number of deliveries 20 40 Number of manu al orders 0 80 Number of electronic orders 15 0 Number of line items picked 120 280 Required: 1. Compute the activity rate for each activity cost pool. 2. Compute the total activity costs that would be assigned to City General and County General.
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