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	Activity Measure	Total Cost		Total Activity
Customer deliveries	Number of deliveries	$	325,600	4,400	deliveries
Manual order processing	Number of manual orders		234,600	3,400	orders
Electronic order processing	Number of electronic orders		183,260	11,900	orders
Line item picking	Number of line items picked		408,000	340,000	line items
Total selling and administrative expenses		$	1,151,460

Med Max gathered the data below for two of the many hospitals that it serves—City General and County General:

	Activity
Activity Measure	City General	County General
Number of deliveries	15	30
Number of manual orders	0	60
Number of electronic orders	15	0
Number of line items picked	110	270

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.

Required 1.

Compute the activity rate for each activity cost pool. (Round your answers to 2 decimal places.)

	Activity Cost Pool Activity Rate Customer deliveries per delivery Manual order processing per manual order Electronic order processing per electronic order Line item picking per line item picked

Required 2.

Compute the total activity costs that would be assigned to City General and County General. (Do not round intermediate calculations.)

	ABC Cost Activity Cost Pool City General County General Customer deliveries Manual order processing Electronic order processing Line item picking Total activity costs $0 $0

Answer 1

Answer-1)-

Med Max
Activity based costing method
Activity Rate
Activity cost pool	Activity rate
Customer deliveries	$74 per delivery
Manual order processing	$69 per order
Electronic order processing	$15.4 per order
Line item packing	$1.2 per line items

2)-

ABC COST
Activity cost pool	City General	County Genreal
	$	$
Customer deliveries	15 deliveries*$74 per delivery =1110	30 deliveries*$74 per delivery =2220
Manual order processing	0	60 orders*$69 per order = 4140
Electronic order processing	15 orders*$15.4 per order =231	0
Line item packing	110 line items*$1.2 per line item =132	270 line items*$1.2 per line item =324
Total activity costs	1473	6684