Med Max distributes medical supplies to doctors' offices and clinics throughout Alberta. Med Max sets its prices by marking up its cost of goods sold by 5%. For example, if Med Max paid $100 to buy supplies from manufacturers, Med Max would charge its customers $105 to purchase these supplies .

For years, Med Max believed that the 5% 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 ABC 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 $400,000 5,000deliveries

Manual order processing Number of manual orders 300,000 4,000orders

Electronic order processing Number of electronic orders 200,000 12,500orders

Line item picking Number of line items picked 500,000 400,000line items

Other organization-sustaining costs NA 600,000

Total selling and administrative expense $2,000,000

Med Max gathered the data below for two of the many clinics that it servesCity Clinic and County Clinic (both clinics purchased a total quantity of medical supplies that had cost Med Max $30,000 to buy from its manufacturers):

Activity

Activity Measure City Clinic County Clinic

Number of deliveries 10 20

Number of manual orders 0 40

Number of electronic orders 10 0

Number of line items picked 100 260

Required:1.Compute the total revenue that Med Max would receive from City Clinic and County Clinic.

City clinic county clinic

Total revenue received ___________ ______________

2.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

3.Compute the total activity costs that would be assigned to City Clinic and County Clinic.

City clinic county clinic

total activity costs __________ ___________

4.Compute Med Max's customer margin for City Clinic and County Clinic. (Hint: Do not overlook the $30,000 cost of goods sold that Med Max incurred serving each clinic.)

City clinic county clinic

customer margin (loss) __________ ___________