Question

Pharmax Distributors specalizes in the distribution of pharmaceutical products at the retal level. Pharmax's customer base is comprised of three main retal grovps general supermarket chains, lerpe drugatore chains, and small, single-store "Ma & Pa" pharmades. To evaluate the relative profitability of each customer group, Phamax plans to use an allocation system that recognizes the relathve 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 pertod: Favernes Support Activity Budgeted Cost Order processing Total Cost Driver $81,000 Line item processing 1,920 customer orders $58,000 20,240 line items Store deliveries $65,000 1,620 deliveries Carton handling $78,000 81,000 cartons shipped She also gathered the following data for a typical operating perlod: General Supermarket Drugstore Chains Ma& Pa Customer orders 130 390 1,400 Line items 1,560 4,680 14,000 Deliveries 310 1,200 110 Cartons shipped 36,300 27,900 16,800 REQUIRED (ROUND ALL ALLOCATION RATES TO THE NEAREST CENT AND ALLOCATIONS TO THE NEAREST DOLLAR. e Part A (S tries: 5 points) ir 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 General Supermarket customers Incorrect. Tries 3/5 Previous Tries Submit Answer Part B (5 tries: S points) Ar Pharmax uses an activity-based costing system to alocate its overhead costs, how much would be allocated to its Ha & Pa customers? My general preferences.on what ismarked asNEW Mark NEW posts e onger nee it Anwer Tries 0/5 Threaded View Chronological View Export Other Views.. NEW cost allocation Anonymous 1 Reply (Wed Jan 8 07:06:55 pm 2020 (EST)) does anytbody know the formula im so confused MacBook Air

Answer 1

Answer A:

Overhead allocated to General Super market customers $ 19,148

Working:

Total overheads = 81000 + 58000 + 65000 + 78000 = $282,000

Total number of deliveries = 1620

Overhead allocation rate per delivery = 282000 / 1620 = $174.07

Overhead allocated to General Super market customers = 174.07 * 110 = $19147.70 or $19,148

Answer B:

Using activity based costing system, overhead allocated to Ma & Pa customers (163,518

Working:

Let us first calculate activity rates:

Activity Order processing Line item processing Store deliveries Carton handling Cost driver Budgeted cost (BC) Cost driver Quantity (Q) $81,000 Customer order 1,920 $58,000 Line items 20,240 $65,000 Deliveries 1,620 $78,000 Cartons shipped 81,000 Activity Rate (BC/Q) $42.19 $2.87 $40.12 $0.96

Overhead allocated to Ma and Pa customers = 42.19 * 1400 + 2.87 * 14000 + 40.12 * 1200 + 0.96 * 16800

= $163,518