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 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: Total Activity 7,000 deliveries 4,eee orders 13,e00 orders Total Cost $ 623,eee 28e,eee Activity Cost Pool (Activity Measure) Customer deliveries (Number of deliveries) Manual order processing (Number of manual orders) Electronic order processing (Number of electronic orders) Line item picking (Number of line items picked) Other organization - sustaining costs (None) Total selling and administrative expenses 338,eee 658,eee 47e, eee 1ine items 660,eee $2,559,e00 Worley gathered the data below for two of the many hospitals that it serves-University and Memorial (each hospital purchased medical supplies that had cost Worley $39,000 to buy from manufacturers): Activity University Memorial 26 Activity Measure Number of deliveries Number of manual orders Number of electronic orders Number of line items picked 15 41 P 20 220 10e Required: 1. Compute the total revenue that Worley would receive from University and Memorial. 4 Activity University Memorial 15 Activity Measure Number of deliveries Number of manual orders Number of electronic orders Number of 1ine items picked 26 41 20 100 220 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 $39,000 cost of goods sold that Worley incurred serving each hospital.) Complete this question by entering your answers in the tabs w. Required 4 Required 2 Required 3 Required 1 Compute the total revenue that Worley would receive from University and Memorial. Total Revenue University Memorial Required 2 Required 1 cxxwwxxxxxi Activity University Memorial 15 Activity Measure Number of deliveries 26 41 Number of manual orders Number of electronic orders Number of line items picked 28 220 100 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 Univers ity and Memorial. 4. Compute Worley's customer margin for University and Memorial. (Hint Do not overlook the $39,000 cost of goods sold that Worley incurred serving each hospital.) Complete this question by entering your answers in the tabs below. Required 2 Required 2 Required 3 Required 4 Required 1 Compute the activity rate for each activity cost pool. (Round your answers to 2 decimal places.) Activity Rate Activity Cost Pool per delivery Customer deliveries Manual order processing per manual order per electronic order Electronic order processing per line item picked Line item picking Required 1 Required 3 > wwww Activity University Memorial 26 Activity Measure Number of deliveries 15 Number of manual orders Number of electronic orders Number of line items picked 41 28 220 100 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 $39,000 cost of goods sold that Worley incurred serving each hospital.) Complete this question by entering your answers in the tabs below. Required 4 Required 3 Required 1 Required 2 Compute the total activity costs that would be assigned to University and Memorial. Total Activity Costs University Memorial Required 4
