Question

Pharmax Distributors specializes in the distribution of pharmaceutical products at the retail level. Pharmax's customer base is comprised of three main retail groups: general supermarket chains, large drugstore chains, and small, single-store "Ma & Pa" pharmacies. To evaluate the relative profitability of each customer group, Pharmax plans to use an allocation system that recognizes the relative demands that these groups place on the company's resources. Parmax's chief accountant examined the firm's support costs and activities and collected the following data for a typical operating period: Support Activity Order processing Line item processing Store deliveries Carton handling Budgeted Cost $72,000 $66,000 $71,000 $71,000 Total Cost Driver 2,230 customer orders 23.000 line items 1,580 deliveries 74,850 cartons shipped She also gathered the following data for a typical operating period: General Supermarket 140 2,100 110 29,700 Drugstore Ma & Pa Customer orders Line items Deliveries Cartons shipped Chains 390 3,900 320 25,600 1,700 17,000 1,150 19,550 REQUIRED [ROUND ALL ALLOCATION RATES TO THE NEAREST CENT AND ALLOCATIONS TO THE NEAREST DOLLAR.] Part A (5 tries; 5 points) If Pharmax uses a single-driver system to allocate its support costs, with number of deliveries as the single driver, how much would be allocated to its Drugstore Chain customers? Submit Answer Tries 0/5 Part B (5 tries; 5 points) If Pharmax uses an activity-based costing system to allocate its overhead costs, how much would be allocated to its General Supermarket customers? Submit AnswerTries 0/5

Answer 1

Part-A
Total Overheads (72000+66000+71000+71000)					280000
Divide: Number of deliveries					1580
Oh cost rate per delivery					177.2152
Multiply: Deliveries of Drugchain					320
OH applied to Drugstore					56708.86
Part-B
STATEMENT SHOWING ACTIVITY RATE OF ACTIVITY POOL
			Activity	Total	Expected	Activity
ACTIVITY COST POOL			Measures	Overheads	Activity	Rate
order processing			Orders	72000	2230	32.29
Line item processing			Line items	66,000	23,000	2.87
Store deliveries			Deliveries	71,000	1,580	44.94
Carton handling			Cartons	71000	74850	0.95
Activity cost of General Supermarket
Activity		Rate	Driver	Overheads
order processing		32.29	140	4520.6
Line item processing		2.87	2100	6027
Store deliveries		44.94	110	4943.4
Carton handling		0.95	29700	28215
		Total Overheads		43706