Answered step by step
Verified Expert Solution
Question
1 Approved Answer
X Requirements Data Table 1. 2. Total Annual Estimated Cost Total Annual Estimated Cost Driver Activity Cost Driver $ 60,000 Technician hours 60,000 Cost Pools
X Requirements Data Table 1. 2. Total Annual Estimated Cost Total Annual Estimated Cost Driver Activity Cost Driver $ 60,000 Technician hours 60,000 Cost Pools Pharmacy occupancy costs (utilities, rent, and other costs). Packaging supplies (bottles, bags, and other packaging)... Professional training and insurance costs 3. 23,000 $ 39,100 Number of prescriptions 147,000 Pharmacist hours 246,100 21,000 4. Total pharmacy overhead What is the traditional overhead rate based on the number of prescriptions? How much pharmacy overhead would be allocated to customer order number 1245 if traditional overhead allocation based on the number of prescriptions is used? How much pharmacy overhead would be allocated to customer order number 1246 if traditional overhead allocation based on the number of prescriptions is used? What are the following cost pool allocation rates: a. Pharmacy occupancy costs b. Packaging supplies c. Professional training and insurance costs How much would be allocated to customer order number 1245 if activity-based costing (ABC) is used to allocate the pharmacy overhead costs? How much would be allocated to customer order number 1246 if activity-based costing (ABC) is used to allocate the pharmacy overhead costs? Which allocation method (traditional or activity-based costing) would produce a more accurate product cost? Explain your answer. 5. Print Done 6. - X Data Table your answers to the nearest cent.) 7. Technician Hours Number of Prescriptions Pharmacist Hours Print Done Customer Order Number 1245 0.5 5 2.0 pol. (Round your answers to the nearest cent. Abbre Customer Order Number 1246 0.5 3 2.5 Westley Pharmacy, part of a large chain of pharmacies, fills a variety of prescriptions for customers. The complexity of prescriptions filled by Westley varies widely; pharmacists can spend between five minutes and six hours on a prescription order. Traditionally, the pharmacy has allocated its overhead based on the number of prescriptions. The pharmacy chain's controller is exploring whether activity-based costing (ABC) may better allocate the pharmacy overhead costs to pharmacy orders. The controller has gathered the following information: (Click the icon to view the expected usage and costs.) The clerk for Westley has gathered the following information regarding two recent pharmacy orders: (Click the icon to view the pharmacy order data.) Read the requirements Requirement 1. What is the traditional overhead rate based on the number of prescriptions? First identify the formula used to compute the traditional overhead rate, then compute the rate. (Round your answer to the nearest cent. Abbreviations used: est. = estimated) Traditional overhead rate Requirement 2. How much pharmacy overhead would be allocated to customer order number 1245 if traditional overhead allocation based on the number of prescriptions is used? (Round your answer to the nearest cent.) The overhead allocated to customer order number 1245 if traditional overhead allocation is used is Requirement 3. How much pharmacy overhead would be allocated to customer order number 1246 if traditional overhead allocation based on the number of prescriptions is used? (Round your answers to the nearest cent.) The overhead allocated to customer order number 1246 if traditional overhead allocation is used is Requirement 4. What are the cost pool allocation rates? Calculate the cost pool allocation rate for each activity. First determine the formula to compute the allocation rate in an activity-based costing system, then compute the rate for each cost pool. (Round your answers to the nearest cent. Abbreviations used: est. = estimated, Ins. = insurance, Pharm. = Pharmacy, PH = pharmacist hour, presc. = prescription, TH = technician hour) Cost pool allocation rate Pharm. occupancy per TH Packaging supplies per presc Training and Ins. per PH Requirement 5. How much would be allocated to customer order number 1245 if activity-based costing (ABC) is used to allocate the pharmacy overhead costs? (Round your answer to the nearest cent.) The overhead allocated to customer order number 1245 if activity-based costing (ABC) is used is Requirement 6. How much would be allocated to customer order number 1246 if activity-based costing (ABC) is used to allocate the pharmacy overhead costs? (Round your answer to the nearest cent.) The overhead allocated to customer order number 1246 if activity-based costing (ABC) is used is Requirement 7. Which allocation method (traditional or activity-based costing) would produce a more accurate product cost? Explain your answer. The allocation method would produce a more accurate product cost because this method takes into account
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started