Question

Thanks for the help!!

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 relaive 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 $81,000 $69,000 $65,000 $76,000 Total Cost Driver 2,000 customer orders 21,700 line items 1,500 deliveries 78,400 cartons shipped She also gathered the following data for a typical operating period: Customer orders Line items Deliveries Cartons shipped General Supermarket 150 1,800 130 40,300 Drugstore Chains 350 4,900 270 21,600 Ma & Pa 1,500 15,000 1,100 16,500 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 customer orders as the single driver, how much would be allocated to its General Supermarket customers? Submit Answer Incorrect. Tries 3/5 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 Ma & Pa customers? Submit Answer Tries 0/5

Answer 1

ANSWER PART A
Traditional Method based on no. of deliveries
Total Support Cost (81000+69000+65000+76000)	$           291,000.00
No. of Deliveries	1500
Support Cost per Delivery	$                  194.00
Traditional Method
Particulars	General Super Market	Drugstore Chains	Ma & Pa
No of Deliveries (A)	130	270	1100
Cost Per Delivery (B)	$                  194.00	$                194.00	$                           194.00
Support Cost (A*B)	$            25,220.00	$          52,380.00	$                   213,400.00
ANSWER PART B
Calculation of Activity Cost per Cost Driver
Activity	Activity Cost	Cost Driver	Activity Cost per Cost Driver
Order Processing	81000	2000 customer orders	40.50
Line Item Procesing	69000	21700 line items	3.18
Store Deliveries	65000	1500 deliveries	43.33
Carton handling	76000	78400 cartons shipped	0.97
Activity	General Super Market	Drugstore Chains	Ma & Pa
Order Processing :40.50*(150/350/1500)	6075	14175	60750	81000
Line Item Procesing: 3.18*(1800/4900/15000)	5723.502304	15580.64516	47695.85253	69000
Store Deliveries: 43.33*(130/270/1100)	5633	11700	47667	65000
Carton handling: 0.97*(40300/21600/16500)	39066.32653	20938.77551	15994.89796	76000
Total Support Cost	56498.16217	62394.42067	172107.4172	291000