Note: Show all calculations
DrugCare Inc. specializes in the distribution of pharmaceutical products. DrugCare buys from pharmaceutical companies and resells to each of three different markets: general supermarket chains drug store chains "Mom and Pop" single-store pharmacies Chris Sorensen, the new controller of Drug Care, reported the following data for August, 20X9: "Mom and Pop" General supermarket chains Drug store chains single stores Average (Avg.) revenue per delivery Avg. cost of goods sold per delivery Number of deliveries $30,900 $30,000 120 $10,500 $10,000 300 $1,980 $1,800 1,000 For many years, DrugCare has used gross margin percentage to evaluate the relative profitability of its different groupings of customers (distribution outlets). Chris recently attended a seminar on activity-based costing and has decided to consider using it at DrugCare. Chris meets with all the key managers and many staff members. People generally agree that there are five key activity areas at DrugCare: Activity area Cost driver Customer purchase order processing Line item ordering Store delivery Cartons shipped to stores Purchase order by customers Line items per purchase order Store deliveries Cartons shipped to a store per delivery Hours of shelf-stocking S. Shelf-stocking at customer stores Each customer purchase order consists of one or more line items. A line item represents a single product (such as Extra-Strength Tylenol tablets). Each store delivery entails delivery of one or more cartons of products to a customer. Each product is delivere one or more separate cartons. DrugCare staff stack cartons directly onto shelves in the store. Currently, there is no charge for this service, and not all customers use Drug Care for this activity. The August, 20X9, operating costs of Drug Care (other than cost of goods sold) are $301,080. These operating costs are assigned to the five activity areas. The costs in each area and the number of cost driver units used in that area for August, 20X9, are as follows WeChat.ull VPN 4:39 PM 30% Total costs in August, 20X9 Total units of cost driver used in August, 2019 Customer purchase order processing Line item ordering Store delivery Cartons shipped to stores Shelf-stocking at customer stores $80,000 63.840 71,000 76,000 10.240 $101080 2,000 21.280 1.420 76,000 640 onders line items store deliveries cartons hours Other data for August, 20X9, include the following: Mom and Pop General supermarket chains Drug store chains single stores 360 1.500 Total number of orders Avg. number of line items per order Total number of store deliveries Avg. number of cartons shipped per store delivery Avg. number of hours of shelf-stocking per store delivery 1.000 300 3.0 06 0.1 Required: What is Drug Care's operating income? Compute the August, 20X9, gross margin percentage [(Revenue - Cost of goods sold) +Revenue) for each of Drug Care's three distribution markets DrugCare's August, 20X9.per-unit cost driver rate for each of the five activity arcas has been calculated as follows: Customer purchase order processing Line item ordering Store delivery Cartons shipped to stores Shell-stocking of customer stores orders line items store deliveries cartons Based on the above information, and your answers from Part (a) and (b), compute the operating income and operating income margin percentage (Operating income Revenues) of each distribution market in August, 20X9, using activity-based costing information
