Question

Med Max buys surgical supplies from a variety of manufacturers and then resells and delivers these supplies to dozens of hospitals. In the face of declining profits, Med Max decided to implement an activity-based costing system to improve its understanding of the costs incurred to serve each hospital. The company broke its selling and administrative expenses into four activities as shown below: Activity Cost Pool Customer deliveries Manual order processing Electronic order processing Line item picking Total selling and administrative expenses Activity Measure Number of deliveries Number of manual orders Number of electronic orders Number of line items picked Total Cost Total Activity $ 453,6005 , 400 deliveries 347,600 4,400 orders 211,560 12,900 orders 638,000 440,000 line items $1,650, 760 Med Max gathered the data below for two of the many hospitals that it serves-City General and County General: Activity City County General General 15 30 Activity Measure Number of deliveries Number of manual orders Number of electronic orders Number of line items picked 15 140 300 Required: 1. Compute the activity rate for each activity cost pool. 2. Compute the total activity costs that would be assigned to City General and County General. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Compute the activity rate for each activity cost pool. (Round your answers to 2 decimal places.) Activity Cost Pool Customer deliveries Manual order processing Electronic order processing Line item picking Activity Rate per delivery per manual order per electronic order per line item picked Required 1 Required 2 >

Answer 1

1
Activity cost pool	Total cost	Total activity	Activity rate
Customer deliveries	453600	5400	84.00	per delivery
Manual order processing	347600	4400	79.00	per manual order
Electronic order processing	211560	12900	16.40	per electronic order
Line item picking	638000	440000	1.45	per line item picked
2
	ABC cost
Activity cost pool	City General	Country General
Customer deliveries	1260	2520
Manual order processing	0	4740
Electronic order processing	246	0
Line item picking	203	435
Total activity costs	1709	7695
Formulas for 2:
Activity cost pool	City General	Country General
Customer deliveries	=15*84	=30*84
Manual order processing	0	=60*79
Electronic order processing	=15*16.40	0
Line item picking	=140*1.45	=300*1.45