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Med Max buys surgical supplies from a variety of manufacturers and then resells and delivers...

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Accounting

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 $ 313,900 4,300 deliveries
Manual order processing Number of manual orders 224,400 3,300 orders
Electronic order processing Number of electronic orders 180,540 11,800 orders
Line item picking Number of line items picked 379,500 330,000 line items
Total selling and administrative expenses $ 1,098,340

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

Activity Measure Activity
City General County General
Number of deliveries 20 40
Number of manual orders 0 80
Number of electronic orders 20 0
Number of line items picked 120 280

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