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please see the attached with the questions I need help with. 4. Worley Company buys surgical supplies from a variety of manufacturers and then resells
please see the attached with the questions I need help with.
4. Worley Company buys surgical supplies from a variety of manufacturers and then resells and delivers these supplies to hundreds of hospitals. Worley sets its prices for all hospitals by marking up its cost of goods sold to those hospitals by 5%. For example, if a hospital buys supplies from Worley that had cost Worley $ 100 to buy from manufacturers, Worley would charge the hospital $ 105 to purchase these supplies. For years, Worley believed that the 5% markup covered its selling and administrative expenses and provided a reasonable profit. However, in the face of declining profits Worley decided to implement an activity- based costing 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 Customer deliveries ( Number of deliveries) . . . . . . . . . . $ 500,000 Manual order processing ( Number of manual orders) . . . 248,000 Electronic order processing ( Number of electronic orders) . . . . . . 200,000 Line item picking ( Number of line items picked) . . . . . . 450,000 Other organization- sustaining costs ( None) . . . . . . . . . 602,000 Total selling and administrative expenses . . . . . . . . . . . $ 2,000,000 Total Activity 5,000 deliveries 4,000 orders 12,500 orders 450,000 line items Worley gathered the data below for two of the many hospitals that it serves University and Memorial ( both hospitals purchased a total quantity of medical supplies that had cost Worley $ 30,000 to buy from its manufacturers): Activity Activity Measure University Memorial Number of deliveries . . . . . . . . . . . . . . . . . . 10 25 Number of manual orders . . . . . . . . . . . . . . 0 30 Number of electronic orders . . . . . . . . . . . . 15 0 Number of line items picked . . . . . . . . . . . . 120 250 Required: 1. Compute the total revenue that Worley would receive from University and Memorial. 2. Compute the activity rate for each activity cost pool. 3. Compute the total activity costs that would be assigned to University and Memorial . 4. Compute Worley's customer margin for University and Memorial. ( Hint: Do not overlook the $ 30,000 cost of goods sold that Worley incurred serving each hospital.) 7. Moody Corporation uses a job- order costing system with a plantwide overhead rate based on machine- hours. At the beginning of the year, the company made the following estimates: Machine- hours required to support estimated production . . . . . . 100,000 Fixed manufacturing overhead cost . . . . . . . . . . . . . . . . . . . . . . . . $ 650,000 Variable manufacturing overhead cost per machine- hour . . . . . $ 3.00 Required: 1. Compute the predetermined overhead rate. 2. During the year, Job 400 was started and completed. The following information was available with respect to this job: Direct materials requisitioned . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 450 Direct labor cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 210 Machine- hours used . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 Compute the total manufacturing cost assigned to Job 400. 3. During the year, the company worked a total of 146,000 machine- hours on all jobs and incurred actual manufacturing overhead costs of $ 1,350,000. What is the amount of underapplied or overapplied overhead for the year? If this amount were closed out entirely to Cost of Goods Sold would the journal entry increase or decrease net operating incomeStep by Step Solution
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