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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 10%. For example, if a hospital buys supplies from Worley that cost Worley $100 to buy from manufacturers, Worley would charge the hospital $110 to purchase these supplies. For years, Worley believed that the 10% 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 Activity Cost Pool (Activity Measure) Manual order processing Number of manual orders) rder processing (Number of electronic orders) Line item picking (Number of line items picked) Other organization-sustaining costs (None) Total selling and administrative expenses Total Cost Total Activity $ 567,000 7,000 deliveries 546,000 7,000 orders 288,000 12,000 orders 1,012,500 450,000 line items 640,000 $3,053,500 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 $36,000 to buy from manufacturers): Activity Measure Number of deliveries Activity University Memorial 13 28 Number of electronic orders Number of line items picked 12 140 290 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 $36,000 cost of goods sold that Worley incurred serving each hospital.) Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Compute the total revenue that Worley would receive from University and Memorial. Total Revenue University Memorial Compute the activity rate for each activity cost pool. (Round your answers to 2 decimal places.) Activity Cost Pool Customer deliveries Manual order processing per delivery per manual order per electronic order Electronic order processing Line item picking per line item picked Compute the total activity costs that would be assigned to University and Memorial. Total Activity Costs University Memorial Compute Worley's customer margin for University and Memorial. (Hint: Do not overlook the $36,000 cost of goods sold that Worley incurred serving each hospital.) (Loss amounts should be indicated with a minus sign. Round your intermediate calculations to 2 decimal places. Round your final answers to the nearest whole number.) Customer Margin University Memorial
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