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 | $ | 510,400 | 5,800 | deliveries |
Manual order processing | Number of manual orders | 398,400 | 4,800 | orders | |
Electronic order processing | Number of electronic orders | 223,440 | 13,300 | orders | |
Line item picking | Number of line items picked | 528,000 | 480,000 | line items | |
Total selling and administrative expenses | $ | 1,660,240 | |||
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 manual orders | 0 | 80 |
Number of electronic orders | 15 | 0 |
Number of line items picked | 130 | 290 |
Required: |
1. | Compute the activity rate for each activity cost pool. (Round your answers to 2 decimal places.) |
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 | |
2. | Compute the total activity costs that would be assigned to City General and County General. (Leave no cells blank - be certain to enter "0" wherever required. Do not round intermediate calculations.) |
City General: |
Activity Cost Pool | ABC Cost | |
Customer deliveries | $ | |
Manual order processing | ||
Electronic order processing | ||
Line item picking | ||
Total activity costs | $ | |
County General: |
Activity Cost Pool | ABC Cost | |
Customer deliveries | $ | |
Manual order processing | ||
Electronic order processing | ||
Line item picking | ||
Total activity costs | $ | |
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