Medtech, inc., a distributor of special pharmaceutical products, operates at capacity and has three main market segments [General supermarket chains, Drugstore chains and Mom-and-pop single-store pharmacies]. Mitch Hamilton, the new controller of Medtech, reported the following data for 2013. For many years, Medtech has used gross margin percentage to evaluate the relative profitability of its market segments. However, Hamiltons recently attended a seminar on activity-based costing and is con. He meets with all the key managers and several of his operations and sales staff and they agree that there are five key activities that drive other operating costsall Medtech: Each customer order consists of one or more line items. A line item represents a single products (such as Extra Strength Tylenol Tablets). Each products line item is delivered in one or more separate cartons. Each store delivery the delivery of one or more cartons of products to a customer Medtech's Staff stacks cartons directly onto display shelves in customer's stores. Currently, there is no additional charge to the customer for shell-stocking and not all customers use Medtech for this activity. The level of each activity in the three market segments and the total cost incurred for each activity in 2013 is as follows. Compute the 20132013 gross margin percentage for each of Meditech's three market segments. Compute the cost driver rates for each of the five activity areas Use the activity-based costing information to allocate the $305, 690 of "other operating costs" to each of the market segments. Compute the operating income for each market segment. Comment on the result. What new insight are available with the activity-based costing information Medtech, inc., a distributor of special pharmaceutical products, operates at capacity and has three main market segments [General supermarket chains, Drugstore chains and Mom-and-pop single-store pharmacies]. Mitch Hamilton, the new controller of Medtech, reported the following data for 2013. For many years, Medtech has used gross margin percentage to evaluate the relative profitability of its market segments. However, Hamiltons recently attended a seminar on activity-based costing and is con. He meets with all the key managers and several of his operations and sales staff and they agree that there are five key activities that drive other operating costsall Medtech: Each customer order consists of one or more line items. A line item represents a single products (such as Extra Strength Tylenol Tablets). Each products line item is delivered in one or more separate cartons. Each store delivery the delivery of one or more cartons of products to a customer Medtech's Staff stacks cartons directly onto display shelves in customer's stores. Currently, there is no additional charge to the customer for shell-stocking and not all customers use Medtech for this activity. The level of each activity in the three market segments and the total cost incurred for each activity in 2013 is as follows. Compute the 20132013 gross margin percentage for each of Meditech's three market segments. Compute the cost driver rates for each of the five activity areas Use the activity-based costing information to allocate the $305, 690 of "other operating costs" to each of the market segments. Compute the operating income for each market segment. Comment on the result. What new insight are available with the activity-based costing information
