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 9%. For example, if a hospital buys supplies from Worley that cost Worley $100 to buy from manufacturers, Worley would charge the hospital $109 to purchase these supplies. For years, Worley believed that the 9% 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: 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 itens picked) Other organization-sustaining costs (None) Total selling and administrative expenses Total Cost $ 581,000 450,000 180,000 1,104,000 678,000 $2,985,000 Total Activity 7,000 deliveries 6,000 orders 10,000 orders 460,000 Line Items 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 $37,000 to buy from manufacturers): Activity Measure: Number of deliveries Number of manual orders Number of electronic orders Number of line items picked Activity University 17 Menorial 25 49 20 e 168 210