Med Max buys surgical supplies from a variety of manufacture

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 imploment an activity company broke its selling and administrative expenses into four activities as shown below costing system to improve its understanding of the costs incurred to serve each hospital. The Total Activity Measur S 361,900 4,700 deliveries Customer deliveries Manual order processing Electronic order processing Line item picking Number of deliveries Number of manual orders Number of electronic orders Number of line items picked 266,400 191,540 518,000 3,700 orders 12,200 orders 370,000 line items s 1,337,840 Total selling and administrative expenses Med Max gathered the data below for two of the many hospitals that it serves City General and County General Activity City General General County Activity Measure Number of deliveries Number of manual orders Number of electronic orders Number of line items picked 15 30 60 20 130 290 O Type here to search

Solution

Answer:

1

Compute the activity rate for each activity cost pool

Customer delivery

77

per dilivery

Mannual Order

72

per Manual Order

Electronic Order processing

15.7

per Electronic Order

Line itaem processing

1.4

per Line iteam picked

Working notes for the above answwer

Cost

/

Activity

$

Activity Rate

Customer delivery

361900

/

4700

77

per dilivery

Mannual Order

266400

/

3700

72

per Manual Order

Electronic Order processing

191540

/

12200

15.7

per Electronic Order

Line itaem processing

518000

/

370,000

1.4

per Line iteam picked

1337840

_______________________________________________

2

City General

Activity Cost Pool

ABC
Cost

Customer delivery

1155

Mannual Order

0

Electronic Order processing

314

Line itaem processing

182

Total Activity Cost

1651

Working notes for the above answwer

Activity Cost Pool

Activity
rate

x

Activity

ABC
Cost

Customer delivery

77

x

15

1155

Mannual Order

72

x

0

0

Electronic Order processing

15.7

x

20

314

Line itaem processing

1.4

x

130

182

_________________________________________

3

Country General

Activity Cost Pool

ABC
Cost

Customer delivery

2310

Mannual Order

4320

Electronic Order processing

0

Line itaem processing

406

Total Activity Cost

7036

Working notes for the above answwer

Activity Cost Pool

Activity
rate

x

Activity

ABC
Cost

Customer delivery

77

x

30

2310

Mannual Order

72

x

60

4320

Electronic Order processing

15.7

x

0

0

Line itaem processing

1.4

x

290

406

Customer delivery	77	per dilivery
Mannual Order	72	per Manual Order
Electronic Order processing	15.7	per Electronic Order
Line itaem processing	1.4	per Line iteam picked