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) Total Cost Total Activity Customer deliveries (Number of deliveries) $ 261,000 3,000 deliveries Manual order processing (Number of manual orders) 468,000 6,000 orders Electronic order processing (Number of electronic orders) 273,000 13,000 orders Line item picking (Number of line items picked) 836,000 440,000 line items Other organization sustaining costs (None) 620,000 Total selling and administrative expenses $ 2,458,000 Worley gathered the data below for two of the many hospitals that it servesUniversity and Memorial (each hospital purchased medical supplies that had cost Worley $32,000 to buy from manufacturers) Activity Measure Activity University Memorial Number of deliveries 19 28 Number of manual orders 0 47 Number of electronic orders 11 0 Number of line items picked 160 290 Required 1 Compute the total revenue that Worley would receive from University and Memorial Total Revenue University $34,880 Memorial $34,880 2 Compute the activity rate for each activity cost pool 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 Total Activity Costs University Memorial 4 Compute Worleys customer margin for University and Memorial ( Hint Do not overlook the $32,000 cost of goods sold that Worley incurred serving each hospital ) Customer Margin University Memorial

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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

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)	Total Cost	Total Activity
Customer deliveries (Number of deliveries)	$ 261,000	3,000	deliveries
Manual order processing (Number of manual orders)	468,000	6,000	orders
Electronic order processing (Number of electronic orders)	273,000	13,000	orders
Line item picking (Number of line items picked)	836,000	440,000	line items
Other organization-sustaining costs (None)	620,000
Total selling and administrative expenses	$ 2,458,000

Worley gathered the data below for two of the many hospitals that it servesUniversity and Memorial (each hospital purchased medical supplies that had cost Worley $32,000 to buy from manufacturers):

Activity Measure	Activity
Activity Measure	University	Memorial
Number of deliveries	19	28
Number of manual orders	0	47
Number of electronic orders	11	0
Number of line items picked	160	290

Required:

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

	Total Revenue
University	$34,880
Memorial	$34,880

2. Compute the activity rate for each activity cost pool.

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.

	Total Activity Costs
University
Memorial

4. Compute Worleys customer margin for University and Memorial. (Hint: Do not overlook the $32,000 cost of goods sold that Worley incurred serving each hospital.)