Worley Company buys surgical supplies from a variety of manufacturers and then resells and delivers...

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Accounting

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 8%. For example, if a hospital buys supplies from Worley that cost Worley $100 to buy from manufacturers, Worley would charge the hospital $108 to purchase these supplies.
For years, Worley believed the 8% 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 improve its understanding of customer profitability. The company broke its selling and administrative expenses into five activities as shown:
Activity Cost Pool (Activity Measure) Total Cost Total Activity
Customer deliveries (Number of deliveries) $ 540,0006,000 deliveries
Manual order processing (Number of manual orders)518,0007,000 orders
Electronic order processing (Number of electronic orders)273,00013,000 orders
Line item picking (Number of line items picked)736,000460,000 line items
Other organization-sustaining costs (None)610,000
Total selling and administrative expenses $ 2,677,000
Worley gathered the data below for two of the many hospitals it servesUniversity and Memorial (each hospital purchased medical supplies that cost Worley $33,000 to buy from manufacturers):
Activity Measure Activity
University Memorial
Number of deliveries 1624
Number of manual orders 049
Number of electronic orders 150
Number of line items picked 120290
Required:
Compute the total revenue Worley would receive from University and Memorial.
Compute the activity rate for each activity cost pool.
Compute the total activity costs assigned to University and Memorial.
Compute Worleys customer margin for University and Memorial. (Hint: Do not overlook the $33,000 cost of goods sold that Worley incurred serving each hospital.)

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