Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Worley Company buys surgical supplies from a varlety of manufacturers and then resells and delivers these supplies to hundreds of hospitals. Worley sets its prices

Worley Company buys surgical supplies from a varlety 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 6%. For example, if a hospital buys supplies from Worley that cost Worley $100 to buy from manufacturers, Worley would charge the hospital $106 to purchase these supplies.
For years, Worley believed the 6% 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 improve its understanding of customer profitability. The company broke its selling and administrative expenses into five activities as shown:
\table[[Activity Cost Pool (Activity Measure),Total Cost,Total Activity],[Customer deliveries (Number of deliveries),$567,000,7,000 deliveries],[Manual order processing (Number of manual orders),666,000,9,000 orders],[Electronic order processing (Number of electronic orders),330,000,15,000 orders],[Line item picking (Number of line items picked),836,000,440,000 line items],[Other organization-sustaining costs (None),600,000,],[Total selling and administrative expenses,$2,999,000,]]
Worley gathered the data below for two of the many hospitals it serves-University and Memorial (each hospital purchased medical supplies that cost Worley $34,000 to buy from manufacturers):
\table[[,Activity],[Activity Measure,University,Memorial],[Number of deliveries,18,27],[Number of manual orders,0,41],[Number of electronic orders,11,0],[Number of line items picked,110,240]]
Required:
Compute the total revenue Worley would receive from University and Memorial.
Compute the activity rate for each activity cost pool.
Compute the total activity costs assigned to University and Memorial.
Compute Worley's customer margin for University and Memorial. (Hint. Do not overlook the $34,000 cost of goods sold that Worley incurred serving each hospital.)
Answer is not complete.
Complete this question by entering your answers in the tabs below.
Required 3
Requilied 4
Compute Worley's customer margin for University and Memorial. (Hint: Do not overlook the $34,000 cost of goods sold that Worley incurred serving each hospital.)
Note: 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.
\table[[,\table[[Customer],[Margin]]],[University,],[Memorial,]]
Show less 4
image text in transcribed

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_2

Step: 3

blur-text-image_3

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

Accounting What The Numbers Mean

Authors: David H. Marshall, Wayne William Mcmanus, Daniel Marshall Viele, Mcmanus Marshall, Daniel F. Viele

10th Edition

1259060705, 978-1259060700

More Books

Students also viewed these Accounting questions

Question

a score of 70 or higher on the test?

Answered: 1 week ago