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 Coot Total Activity Customer deliveries (Number of deliveries) $ 500,000 5,000 deliveries Manual order processing Number of manual orders 248,000 4,000 orders Electronic order processing Number of electronic orders) 200,000 12,500 orders Line Item picking (Number of line items picked) 450,000 450,000 line items Other organization-sustaining costs (None) 602.000 Total selling and administrative expenses $2,000,000 Woriey 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 $30,000 to buy from manufacturers): Activity Measure Number of deliveriou Number of manual orders Number of electronic orders Number of Hine Items picked Activity University Memorial 10 25 0 30 15 0 120 250 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 $30,000 cost of goods sold that Worley Incurred serving each hospital

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

Auditor Essentials 100 Concepts Tips Tools And Techniques For Success

Authors: Hernan Murdock

1st Edition

1138036919, 978-1138036918

More Books

Students also viewed these Accounting questions

Question

2. Which symptoms of ASPD did Bill have?

Answered: 1 week ago

Question

What are the role of supervisors ?

Answered: 1 week ago