Pain ae 2. Westford Pharmacy, part of a large chain of pharmacies, fills a variety of prescriptions for customers. The The controller has gathered the following information: complexity of prescriptions filled by Westford varies widely; pharmacists can spend between five minutes ?(Click the icon to view the expected usage and costs.) and six hours on a prescription order. Traditionally, the pharmacy has allocated its overhead based on the The clerk for Westford has gathered the following information regarding two recent pharmacy orders: number of prescriptions. The pharmacy chain's controller is exploring whether activity-based costing 2(Click the icon to view the pharmacy order data.) (ABC) may better allocate the pharmacy overhead costs to pharmacy orders. Read the requirements? Requirement 1. What is the traditional overhead rate based on the number of prescriptions? First identify the formula used to compute the traditional overhead rate, then compute the rate. (Round your answer to the nearest cent. Abbreviations used: est. = estimated) Est. total pharmacy overhead Est. number of prescriptions Traditional overhead rate $ 198,000 24,000 8.25 . = Requirement 2. How much pharmacy overhead would be allocated to customer order number 1241 if traditional overhead allocation based on the number of prescriptions is used? (Round your answer to the nearest cent.) The overhead allocated to customer order number 1241 if traditional overhead allocation is used is $ 33.00 Requirement 3. How much pharmacy overhead would be allocated to customer order number 1242 if traditional overhead allocation based on the number of prescriptions is used? (Round your answers to the nearest cent.) The overhead allocated to customer order number 1242 if traditional overhead allocation is used is $ 16.50 Requirement 4. What are the cost pool allocation rates? Calculate the cost pool allocation rate for each activity. First determine the formula to compute the allocation rate in an activity-based costing system, then compute the rate for each cost pool. (Round your answers to the nearest cent. Abbreviations used: est. = estimated, Ins. = insurance, Pharm. = Pharmacy, PH = pharmacist hour, presc. = prescription, TH = technician hour) Cost pool Total est. activity cost pool . Total est. activity allocation base allocation rate Pharm. occupancy $ 96,000 80,000 $ 1.20 per TH Packaging supplies $ 24,000 24,000 $ 1.00 per presc. Training and Ins. $ 78,000 26,000 = $ 3.00 per PH Requirement 5. How much would be allocated to customer order number 1241 if activity-based costing (ABC) is used to allocate the pharmacy overhead costs? (Round your answer to the nearest cent.) The overhead allocated to customer order number 1241 if activity-based costing (ABC) is used is Requirement 6. How much would be allocated to customer order number 1242 if activity-based costing (ABC) is used to allocate the pharmacy overhead costs? (Round your answer to the nearest cent.) The overhead allocated to customer order number 1242 if activity-based costing (ABC) is used is Requirement 7. Which allocation method (traditional or activity-based costing) would produce a more accurate product cost? Explain your answer. The (1) allocation method would produce a more accurate product cost because this method takes into account (2) 1: Data Table Total Annual Estimated Cost Total Annual Estimated Cost Driver Activity Cost Driver Cost Pools Pharmacy occupancy costs (utilities, rent, and other costs). Packaging supplies (bottles, bags, and other packaging)... $ 96,000 Technician hours 80,000 24,000 Number of prescriptions .. 24,000 $ Professional training and insurance costs 78,000 Pharmacist hours 26,000 $ 198,000 Total pharmacy overhead . 2: Data Table Technician Hours Number of Prescriptions Pharmacist Hours Customer Order Number 1241 0.5 4 3.0 Customer Order Number 1242 0.5 2 1.5 3: Requirements 1. 2. 3. 4. What is the traditional overhead rate based on the number of prescriptions? How much pharmacy overhead would be allocated to customer order number 1241 if traditional overhead allocation based on the number of prescriptions is used? How much pharmacy overhead would be allocated to customer order number 1242 if traditional overhead allocation based on the number of prescriptions is used? What are the following cost pool allocation rates: a. Pharmacy occupancy costs b. Packaging supplies c. Professional training and insurance costs How much would be allocated to customer order number 1241 if activity-based costing (ABC) is used to allocate the pharmacy overhead costs? How much would be allocated to customer order number 1242 if activity-based costing (ABC) is used to allocate the pharmacy overhead costs? Which allocation method (traditional or activity-based costing) would produce a more accurate product cost? Explain your answer. 5. 6. 7. (1) activity-based costing O traditional (2) O the number of prescriptions used by each order O the pharmicist hours used by each order O the specific resources used by each order the technician hours used by each order
