Question

Help with part B please!

Pharmax Distributors specializes in the distribution of pharmaceutical products at the retail level. Pharmax's customer base is comprised of three main retail groups: general supermarket chains, large drugstore chains, and small, single-store "Ma & Pa" pharmacies. To evaluate the relative profitability of each customer group, Pharmax plans to use an allocation system that recognizes the relative 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 period: Support Activity Order processing Line item processing Store deliveries Carton handling Budgeted Cost $74,000 $64,000 $67,000 $73,000 Total Cost Driver 1,830 customer orders 18,970 line items 1,400 deliveries 73,000 cartons shipped She also gathered the following data for a typical operating period Customer orders Line items Deliveries Cartons shipped General Supermarket 140 1,680 100 30,000 Drugstore Chains 390 4,290 300 27,000 Ma & Pa 1,300 13,000 1,000 16,000 REQUIRED [ROUND ALL ALLOCATION RATES TO THE NEAREST CENT AND ALLOCATIONS TO THE NEAREST DOLLAR.) Part A (5 tries; 5 points) If 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 Ma & Pa customers? $198,570 You are correct. Your receipt no. is 152-5995 Part B (5 tries; 5 points) If Pharmax uses an activity-based costing system to allocate its overhead costs, how much would be allocated to its Drugstore Chain customers? 47300.7 Submit Answer Incorrect. Tries 2/5 Previous Tries

Answer 1

Part B:
Support activity	Budgeted cost	Total cost driver	Activity rate	X Drugstore Chain activity	Overhead allocated
Order processing	74000	1830	40.44	390	15772
Line item processing	64000	18970	3.37	4290	14457
Store deliveries	67000	1400	47.86	300	14358
Carton handling	73000	73000	1.00	27000	27000
				Total	71587
Overhead allocated to Drugstore Chain customers $71587