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 $ 313,900 224,400 180,540 379,500 $ 1,098,340 Total Activity 4,300 deliveries 3,300 orders 11,800 orders 330,000 line items 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 20 40 Activity Measure Number of deliveries Number of manual orders Number of electronic orders Number of line items picked 20 120 280 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 Cat h ool Rate - 1 food a Atienty Cast And linnat Activity Rate Total Cost Total activity for each activity w Total Cart 1 Total activity - cutomer deliveries o nohy (313900 1300 deliveries = 0313900 YOO $ 73 per a delivery Order lil Atunity Cast pool - Manual u processing bet & 22 4400 at Actiuity - 3300 Orders Atunity Rate & 2244000 3,300 - $68 per Order

(ii) Activity whout pool Electronic Order I own processing Activity = 11800 orders Activity Rate 180549 ally l 15.3 pers Order I Actriuty Cost pool - Line item picking I Cast - $379,500 bow | Activity = x 330,000 line iteme 11,800 1 Acticity Rate = 1 379500 Xoled 330000 - I 1.15 per line item

2. Total activity cache assigned to in (i) City Ceneral - 2081 Number of deliveries =20 X$73 = $1460 Manual ordere = o Xc 68 I So Electronic Orders = 20 x $15.3 = $306. Line items picked - 120X $ 1.15 - $138 Total activity Couts 1 1904 ( Country General - No. of deliveries - YoX 873 12920 Manual orders =80x868 = 15440 Electronic Ordere = o X 15.3 = lo Like items priked = 280 X 61.15= $322 $8682