Question

HW Score: 53.15%, 5.31 of 10 lp 4 E4-23A (similar to) Wolanin Pharmacy, part of a large chain of pharmacies fills a variety of prescriptions for customers. The complexity of prescriptions filed by Wolanin varies widely pharmacists can spend between five minutes and six hours on a prescription order Traditionally, the pharmacy has allocated its overhead based on the number of prescriptions. The pharmacy chain's controller is exploring whether activity based cofing (ABC) may better locate the pharmacy overhead costs to pharmacy orders Requirements Х Requirement 1. What is the traditional overhead rate based on the number of prescriptions? Festiertly the formula used to compute the traditional overhead tate, then compute the rate Round your 1. What is the traditional overhead rate based on the number of prescriptions? 2 How much pharmacy overhead would be allocated to customer order number 1242 traditional overhead allocation based on the number of prescriptions is used? 3. How much pharmacy overhead would be located to customer order number 123 traditional overhead allocation based on the number of prescriptions is use? What are the folowng cost pool location rates a Paracy occupancy conts b. Packaging sub c. Professional training and insurance costs 5. How much would be allocated to customer order number 1242 activity-based costing (ABC) is used to allocate the pharmacy overhead 6. How much would be allocated to customer order number 1243 activity based costing (ABC) sed to allocate the pharmacyovethod Choose from any drop-down list and then click Check Answer

Answer 1

Solution:

1.)

Traditional overhead rate = Total fixed overhead / Total prescriptions

Traditional overhead rate = $284,000 / 20,000 hours

= $14.20per prescription

2.)

Overhead allocated to customer 1242 = 4 × $14.20

= $56.80

3.) Overhead allocated to customer 1243 = 2 × $14.20

= $28.40

4.)

Activity	Cost	Cost Driver	Cost per Cost driver
a.) Pharmacy occupancy costs	$102,000	85,000 Technician hours	$1.20 per technician hour
b.) Packaging Supplies	$32,000	20,000 number of prescription	$1.60 per prescription
c.) Professional Training	$150,000	25,000 Pharmacist hours	$6.00 per pharmacist hour
Total	$284,000

5. & 6.)

	1242	1243
Overhead allocated
Pharmacy Occupancy Costs	$0.60 ($1.20 × 0.5)	0.60 ($1.20 × 0.5)
Packaging Supplies	$6.40 ($1.60 × 4)	$3.20 ($1.60 × 2)
Professional Training	$12 (2.0 × $6)	$21 (3.5 × $6)
Total Overhead	$19.00	$24.80

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