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 had 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 below:

Activity Cost Pool (Activity Measure)Total CostTotal ActivityCustomer deliveries (Number of deliveries)$574,0007,000deliveriesManual order processing (Number of manual orders)380,0005,000ordersElectronic order processing (Number of electronic orders)270,00015,000ordersLine item picking (Number of line items picked)1,104,500470,000line itemsOther organization-sustaining costs (None)700,000Total selling and administrative expenses$3,028,500

Worley gathered the data below for two of the many hospitals that it servesUniversity and Memorial (both hospitals purchased a total quantity of medical supplies that had cost Worley $35,000 to buy from its manufacturers):

Activity

Activity Measure University Memorial

Number of deliveries 10 20

Number of manual orders 0 47

Number of electronic orders 19 0

Number of line items picked 180 300

Required:1.Compute the total revenue that Worley would receive from University and Memorial.

Total Revenue

University _______________

Memorial _______________

2.Compute the activity rate for each activity cost pool.(Round your answers to 2 decimal places.)

Activity Cost Pool Activity Rate

Customer deliveries_______________________________________ per delivery

Manual order processing__________________________________per manual order

Electronic order processing_______________________________per electronic order

Line item picking___________________________________________per line item picked

3.Compute the total activity costs that would be assigned to University and Memorial.(Round your intermediate calculations and final answers to 2 decimal places.)

Total Activity Costs

University ________________________

Memorial_________________________

4.Compute Worley's customer margin for University and Memorial. (Hint: Do not overlook the $35,000 cost of goods sold that Worley incurred serving each hospital.)(Loss amount should be indicated with a minus sign. Round your intermediate calculations and final answers to 2 decimal places.)

Customer Margin

University_________________________

Memorial__________________________