Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Question 3: Case study on Pharma Save Ltd. Pharma Save Ltd specialises in the distribution of pharmaceutical products. It buys from pharmaceutical companies and re-sells

image text in transcribed

Question 3: Case study on Pharma Save Ltd. Pharma Save Ltd specialises in the distribution of pharmaceutical products. It buys from pharmaceutical companies and re-sells to each of the three different distribution channels: (i) General supermarket chains, (ii) Drug store chains, and (iii) Individual chemist shops. The company plans to use activity-based costing for analysing the profitability of its distribution channels. The following data relates to the quarter ending March 2020. General Individual Particulars supermarket Drug store chemist chains chains shops Average sales per delivery $96,500 $32,450 $6,225 Average cost of goods sold per delivery $94,650 $31,800 $5,950 Number of deliveries 960 2,470 8,570 Number of orders 1,000 2,650 9,500 Average number of cartons shipped per delivery 250 75 12 Average number of hours of shelf stocking per delivery 2 0.5 0.1 The following information is available in respect of operating costs (other than cost of goods sold) for the quarter ending March 2020. Activity areas Cost Cost driver Customer purchase order processing $591,750 Purchase orders by customers Customer store delivery $960,000 Number of deliveries Number of cartons dispatched to Cartons dispatched to customer stores $792,135 customer stores Shelf stocking at customer location $80,240 Hours of shelf stocking Required: (a) Calculate the activity cost driver rates for each of the activity areas. (b) Prepare an income statement showing details of each distribution channel for the quarter ending March 2020 using activity-based costing

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Managerial Accounting

Authors: Kurt Heisinger, Joe Ben Hoyle

1st Edition

1453345299, 9781453345290

More Books

Students also viewed these Accounting questions