Question 1 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 DrugCare, reported the following data for August, 2012: "Mom and General supermarket Drug Pop" store single chains chains stores Average (Avg.) revenue per delivery $30,900 $10,500 $1,980 Avg. cost of goods sold per delivery $30,000 $10,000 $1,800 Number of deliveries 120 300 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 1. Customer purchase order processing 2. Line item ordering 3. Store delivery 4. Cartons shipped to stores delivery 5. Shelf-stocking at customer stores Purchase order by customers Line items per purchase order Store deliveries Cartons shipped to a store per Hours of shelf-stocking 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 delivered in 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 DrugCare for this activity. The August, 2012, operating costs of DrugCare (other than cost of goods sold) are $301,080. These operating costs are assigned to the five activity areas. The costs in each