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Worley Company buys surgical supplies from a variety of manufacturers and then resells and delivers these supplies to hundreds of hospitals. Worley sets its prices for all hospitals by marking up its cost of goods sold to those hospitals by 9%. For example, if a hospital buys supplies from Worley that had cost Worley $100 to buy from manufacturers, Worley would charge the hospital $109 to purchase these supplies.

For years, Worley believed that the 9% markup covered its selling and administrative expenses and provided a reasonable profit. However, in the face of declining profits Worley decided to implement an activity-based costing system to help improve its understanding of customer profitability. The company broke its selling and administrative expenses into five activities as shown below: Activity Cost Pool (Activity Measure) Total Cost Total Activity Customer deliveries (Number of deliveries) $ 510,000 6,000 deliveries Manual order processing (Number of manual orders) 539,000 7,000 orders Electronic order processing (Number of electronic orders) 260,000 13,000 orders Line item picking (Number of line items picked) 943,000 460,000 line items Other organization-sustaining costs (None) 610,000 Total selling and administrative expenses $ 2,862,000 Worley gathered the data below for two of the many hospitals that it servesUniversity and Memorial (both hospitals purchased a total quantity of medical supplies that had cost Worley $31,000 to buy from its manufacturers): Activity Activity Measure University Memorial Number of deliveries 16 21 Number of manual orders 0 47 Number of electronic orders 10 0 Number of line items picked 130 290 1. Compute the total revenue that Worley would receive from University and Memorial. University: $33,790 Memorial: $33,790 2. Compute the activity rate for each activity cost pool. (Round your answers to 2 decimal places.) Customer Deliveries: $85 per delivery Manual Order Processing: $77 per manual order Electronic Order Processing: $20 per electronic order Line item picking: $2.05 per line item picked 3. Compute the total activity costs that would be assigned to University and Memorial. (Round your intermediate calculations and final answers to 2 decimal places.) Total Activity Costs University Memorial 4. Compute Worleys customer margin for University and Memorial. (Hint: Do not overlook the $31,000 cost of goods sold that Worley incurred serving each hospital.) (Loss amount should be indicated with a minus sign. Round your intermediate calculations and final answers to 2 decimal places.) University: Memorial:

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