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 7 % . For example, if a hospital buys supplies from Worley that cost Worley $100 to buy from manufacturers, Worley would charge the hospital $107 to purchase these supplies. For years, Worley believed that the 7 % 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 Cost 348,000 504,000 240,000 774,000 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 (Nunber of line items picked) Other organization-sustaining costs (None) Total Activity 4,000 deliveries 7,000 orders 15,000 orders 430,000 1ine itens 610,000 $2,476,000 Total selling and administrative expenses 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 18 Activity Measure Number of deliveries Memorial 29 46 Nunber of manual orders Nunber of electronic orders Number of line itens picked 12 160 260 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 $39,000tost of goods sold that Worley incurred serving each hospital.) 1 of 7 Prev Next>