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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 Cost Pool Customer deliveries Manual order processing Electronic order processing Line item picking Total selling and administrative expenses Activity Measure Number of deliveries Number of manual orders Number of electronic orders Number of line items picked Total Cost $ 525,100 411,600 226,460 514,500 $1,677,660 Total Activity 5,900 deliveries 4,900 orders 13,400 orders 490,000 line items Med Max gathered the data below for two of the many hospitals that it serves-City General and County General: Activity City County General General 10 20 Activity Measure Number of deliveries Number of manual orders Number of electronic orders Number of line items picked 0 10 140 40 0 300 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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