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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 Measure Number of deliveries $ Activity Cost Pool Customer deliveries Total Cost Total Activity 5,900 deliveries 525,100 Number of manual Manual order processing 411,600 4,900 orders orders Number of electronic Electronic order processing 226,460 13,400 orders orders Number of line items Line item picking 514,500 490,000 line items picked Total selling and administrative $1,677,660 expenses Med Max gathered the data below for two of the many hospitals that it serves-City General and County General: Activity City County Activity Measure Number of deliveries General General 10 20 Number of manual 40 orders Number of electronic 10 0 orders Number of line items 140 300 picked Required 1 Required 2 Compute the total activity costs that would be assigned to City General and County General. (Do not round intermediate calculations.) Cost City General County General Activity Cost Pool Customer deliveries Manual order processing Electronic order processing Line item picking Total activity costs Required 1 Required 2
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