Med Max buys surgical supplies from a variety of manufacturers and then resells and delivers these...
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Med Max buys surgical supplies from a variety of manufacturersand then resells and delivers these supplies to dozens ofhospitals. In the face of declining profits, Med Max decided toimplement an activity-based costing system to improve itsunderstanding of the costs incurred to serve each hospital. Thecompany broke its selling and administrative expenses into fouractivities as shown below:
Activity Cost Pool Activity Measure Total Cost Total Activity Customer deliveries Number of deliveries $ 426,400 5,200 deliveries Manual order processing Number of manual orders 323,400 4,200 orders Electronic order processing Number of electronic orders 205,740 12,700 orders Line item picking Number of line items picked 567,000 420,000 line items Total selling and administrative expenses $ 1,522,540
Med Max gathered the data below for two of the many hospitalsthat it serves—City General and County General:
Activity Activity Measure City General County General Number of deliveries 20 40 Number of manual orders 0 80 Number of electronic orders 15 0 Number of line items picked 120 280
Required:
1. Compute the activity rate for each activity cost pool.
2. Compute the total activity costs that would be assigned toCity General and County General.
Med Max buys surgical supplies from a variety of manufacturersand then resells and delivers these supplies to dozens ofhospitals. In the face of declining profits, Med Max decided toimplement an activity-based costing system to improve itsunderstanding of the costs incurred to serve each hospital. Thecompany broke its selling and administrative expenses into fouractivities as shown below:
| Activity Cost Pool | Activity Measure | Total Cost | Total Activity | ||
| Customer deliveries | Number of deliveries | $ | 426,400 | 5,200 | deliveries |
| Manual order processing | Number of manual orders | 323,400 | 4,200 | orders | |
| Electronic order processing | Number of electronic orders | 205,740 | 12,700 | orders | |
| Line item picking | Number of line items picked | 567,000 | 420,000 | line items | |
| Total selling and administrative expenses | $ | 1,522,540 | |||
Med Max gathered the data below for two of the many hospitalsthat it serves—City General and County General:
| Activity | ||
| Activity Measure | City General | County General |
| Number of deliveries | 20 | 40 |
| Number of manual orders | 0 | 80 |
| Number of electronic orders | 15 | 0 |
| Number of line items picked | 120 | 280 |
Required:
1. Compute the activity rate for each activity cost pool.
2. Compute the total activity costs that would be assigned toCity General and County General.
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