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Activity Level 13 14 Activity-based Cost Data 15 Pharmahelp 2017 16 17 Activity 18 Orders processed (number) 19 Line-items ordered number) 20 Store deliveries made (number) 21 Cartons shipped to stores (number) 22 Sheif stocking (hours) 23 General Supermarket Chains 140 1.960 120 36,000 360 Drugstore Chains 380 4,320 360 24,000 180 Mom-and-Pop Single Stores 1,500 15,000 1.000 16,000 100 Total Cost of Activity in 2017 $ 80.000 63.840 71,000 76,000 10 240 3301080 Required 1. Compute the 2017 gross-margin percentage for each of Pharmahelp's three market segments. 2 Compute the cost driver rates for each of the five activity areas. 3. Use the activity based costing information to allocate the $301.080 of other operating costs to each of the market segments. Compute the operating income for each market segment. 112 CHAPTER 5 ACTIVITY-BASED COSTING AND ACTIVITY-BASED MANAGEMENT For many years, Pharmahelp has used gross margin percentage (Revenue - Cost of goods sold) + Revenuel to evaluate the relative profitability of its market segments. But Flair recently attended a seminar on activity-based costing and is considering using it at Pharmahelp to analyze and allocate other operating costs." He meets with all the key managers and several of his operations and sales staff, and they agree that there are five key activities that drive other operating costs at Pharmahelp: Activity Area Cost Driver Order processing Number of customer purchase orders Line-item processing Number of line items ordered by customers Delivering to stores Number of store deliveries Cartons shipped to store Number of cartons shipped Stocking of customer store shelves Hours of shelf-stocking Each customer order consists of one or more line items. A line item represents a single product (such as Extra-Strength Tylenol Tablets). Each product line item is delivered in one or more separate cartons. Each store delivery entails the delivery of one or more cartons of products to a customer. Pharmahelp's staff stacks cartons directly onto display shelves in customers' stores. Currently, there is no additional charge to the customer for shelf-stocking and not all customers use Pharmahelp for this activity. The level of each activity in the three market segments and the total cost incurred for each activity in 2017 is as follows: Home Insert Page Layout Data Review View Formulas B Activity Level 13 14 Activity-based Cost Data 15 Pharmahelp 2017 16 17 Activity 18 Orders processed (number) 19 Line-items ordered (number) 20 Store deliveries made (number) 21 Cartons shipped to stores (number) 22 Shelf stocking (hours) 23 General Supermarket Chains 140 1,960 120 36,000 360 Drugstore Chains 360 4,320 360 24.000 180 Mom-and-Pop Single Stores 1,500 15,000 1,000 16.000 100 Total Cost of Activity in 2017 $ 80,000 63,840 71,000 76,000 10,240 $301.080 Required 1. Compute the 2017 gross-margin percentage for each of Pharmahelp's three market segments. 2 Compute the cost driver rates for each of the five activity areas. 3. Use the activity-based costing information to allocate the $301,080 of other operating costs to each of the market segments. Compute the operating income for each market segment Activity Level 13 14 Activity-based Cost Data 15 Pharmahelp 2017 16 17 Activity 18 Orders processed (number) 19 Line-items ordered number) 20 Store deliveries made (number) 21 Cartons shipped to stores (number) 22 Sheif stocking (hours) 23 General Supermarket Chains 140 1.960 120 36,000 360 Drugstore Chains 380 4,320 360 24,000 180 Mom-and-Pop Single Stores 1,500 15,000 1.000 16,000 100 Total Cost of Activity in 2017 $ 80.000 63.840 71,000 76,000 10 240 3301080 Required 1. Compute the 2017 gross-margin percentage for each of Pharmahelp's three market segments. 2 Compute the cost driver rates for each of the five activity areas. 3. Use the activity based costing information to allocate the $301.080 of other operating costs to each of the market segments. Compute the operating income for each market segment. 112 CHAPTER 5 ACTIVITY-BASED COSTING AND ACTIVITY-BASED MANAGEMENT For many years, Pharmahelp has used gross margin percentage (Revenue - Cost of goods sold) + Revenuel to evaluate the relative profitability of its market segments. But Flair recently attended a seminar on activity-based costing and is considering using it at Pharmahelp to analyze and allocate other operating costs." He meets with all the key managers and several of his operations and sales staff, and they agree that there are five key activities that drive other operating costs at Pharmahelp: Activity Area Cost Driver Order processing Number of customer purchase orders Line-item processing Number of line items ordered by customers Delivering to stores Number of store deliveries Cartons shipped to store Number of cartons shipped Stocking of customer store shelves Hours of shelf-stocking Each customer order consists of one or more line items. A line item represents a single product (such as Extra-Strength Tylenol Tablets). Each product line item is delivered in one or more separate cartons. Each store delivery entails the delivery of one or more cartons of products to a customer. Pharmahelp's staff stacks cartons directly onto display shelves in customers' stores. Currently, there is no additional charge to the customer for shelf-stocking and not all customers use Pharmahelp for this activity. The level of each activity in the three market segments and the total cost incurred for each activity in 2017 is as follows: Home Insert Page Layout Data Review View Formulas B Activity Level 13 14 Activity-based Cost Data 15 Pharmahelp 2017 16 17 Activity 18 Orders processed (number) 19 Line-items ordered (number) 20 Store deliveries made (number) 21 Cartons shipped to stores (number) 22 Shelf stocking (hours) 23 General Supermarket Chains 140 1,960 120 36,000 360 Drugstore Chains 360 4,320 360 24.000 180 Mom-and-Pop Single Stores 1,500 15,000 1,000 16.000 100 Total Cost of Activity in 2017 $ 80,000 63,840 71,000 76,000 10,240 $301.080 Required 1. Compute the 2017 gross-margin percentage for each of Pharmahelp's three market segments. 2 Compute the cost driver rates for each of the five activity areas. 3. Use the activity-based costing information to allocate the $301,080 of other operating costs to each of the market segments. Compute the operating income for each market segment