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Worley Company buys surgical supplles from a variety of manufacturers and then reselis and dellvers these supplies to hundreds of hospitals. Worley sets its prices
Worley Company buys surgical supplles from a variety of manufacturers and then reselis and dellvers these supplies to hundreds of hospitals. Worley sets its prices for all hospltals by marking up its cost of goods sold to those hospitals by 7%. For example, if a hospital buys supplies from Worley that cost Worley $100 to buy from manufacturers, Worley would charge the hospital $107 to purchase these supplies. For years, Worley believed the 7% 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 profitablity. The company broke its selling and administrative expenses into five octivities as shown: Worley gathered the data below for two of the many hospitais it serves-University and Memorial (each hospital purchased medical supplles that cost Worley $30,000 to buy from manufacturers): Required: 1. Compute the total revenue Worley would recelve from Unlversity and Memorlal. 2. Compute the activity rate for each activity cost pool, 3. Compute the total activity costs asslgned to Unlversity and Memorlal. 4. Compute Worley's customer margin for Untversity and Memorial. (Hilnt Do not overlook the $30,000 cost of goods sold that Worley incurred serving each hospitaL)
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