Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

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

image text in transcribed
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: Activity Cost Pool (Activity Measure) Total Cost Total Activity Customer deliveries (Number of deliveries) $500,000 5.000 deliveries Manual order processing Number of manual orders) 4,000 orders Electronic order processing Number of electronic orders) 200,000 12,50 orders Line Item picking (Number of line itens picked) 450,00 line Items other organization-sustaining costs (hone) Total selling and administrative expenses $2,000,000 245.000 Worley gathered the data below for two of the many hospitals that it serves - University and Memorial (each hospital puid aced medical supplies that had cost Worley $30,000 to buy from manufacturers); Activity Measure Number of deliveries Number of manual orders Number of electronic orders Activity University Memorial 10 25 30 15 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: Activity Cost Pool (Activity Measure) Total Cost Total Activity Customer deliveries (Number of deliveries) $500,000 5.000 deliveries Manual order processing Number of manual orders) 4,000 orders Electronic order processing Number of electronic orders) 200,000 12,50 orders Line Item picking (Number of line itens picked) 450,00 line Items other organization-sustaining costs (hone) Total selling and administrative expenses $2,000,000 245.000 Worley gathered the data below for two of the many hospitals that it serves - University and Memorial (each hospital puid aced medical supplies that had cost Worley $30,000 to buy from manufacturers); Activity Measure Number of deliveries Number of manual orders Number of electronic orders Activity University Memorial 10 25 30 15

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Financial Accounting Tools For Business Decision Making

Authors: Paul D. Kimmel

4th Canadian Edition

0470155353, 978-0470155356

More Books

Students also viewed these Accounting questions

Question

Explain the factors that determine the degree of decentralisation

Answered: 1 week ago

Question

What Is acidity?

Answered: 1 week ago

Question

Explain the principles of delegation

Answered: 1 week ago

Question

State the importance of motivation

Answered: 1 week ago

Question

Discuss the various steps involved in the process of planning

Answered: 1 week ago

Question

7. What are the main provisions of the FMLA?

Answered: 1 week ago

Question

2. Do small companies need to develop a pay plan? Why or why not?

Answered: 1 week ago