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 typica operating period: Support Activity Order processing Line item processing Store deliveries Carton handling Budgeted Cost $74,000 $ 64,000 $69,000 $77,000 Total Cost Driver 1,900 customer orders 19,650 line items 1,370 deliveries 66,600 cartons shipped 66.6 She also gathered the following data for a typical operating period: Ma & Pa 1,400 General Supermarket 150 1,800 100 27,000 Customer orders Line items Deliveries Cartons shipped Drugstore Chains 350 3,850 270 14,000 1,000 21,600 18,000 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? 62912.5 Submit Answer Incorrect. Tries 4/5 Previous Tries 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 Answer Tries 0/5

Answer 1

Overhead rate = Activity budgeted lost Activity driwen Order processing e 74000 / 1900 = 38.9474 Line Item processing : 3.2569. per lure item Loo Stores deliveries - 50.3649 per delivery 103+ Carton handling B101562 per coordon shipped (A) Single driven System : (Base number of deliveries) OH. Rate = Total Duerhead sa Total number of deliveries 284000 open 1370 Coo 2 207. 2993 per deliver Queshead lost allocated to drugstore chain $ 207. 2993 X 270 deliveries = $ 55970.8

© Allocation of our head based costing to cost using activity General Supermarket. Rate Conuer Amount, Order prop lessing 38.9474 150 5842|| 3.2569 1800 5862.42 Line item processing stores delivery 50-3649 100 5036.49 carton handling 101562.2700031217.4 Total Quehead cost 4.7958.42

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