hospitals wore sets its pnces for a hospitals by marking up

hospitals wore sets its pnces for a hospitals by marking up its cost of goods sold to those hospitals by 5% For example if a hospital buys supplies from Worley that cost Worley $100 to buy from manufacturers, Worley would charge the hospital $105 to purchase these However, in the face of declining p Worley decided to implement an activity-based costing system to help improve its of customer profitability. The company broke its selling and administrative e Manual order processing (Number of manual orders) Other organization-sustaining costs (None) medical supplies that had cost Worley $34,000 to buy from manufacturers) rial Nunben of eanual onders Nurber of electronic orders 110

Solution

NOTE-The Question is done as per the understanding that the selling and distribution cost is not included in the cost of $ 34,000 and the same is separately added and calculated that ways. Other assumptions will lead to a different answer
Solution:-

Required 1 Total Revenue that Worley received from University and Mumbai
Cost of goods Profit @5% on goods Selling & Distribution cost Total Revenue
A B C
(Refer Required 3) A+B+C
University 34000 1700                                                   2,034                            37,734
Mumbai 34000 1700                                                   6,630                            42,330
Total Revenue                          80,063
Required 2 Current Selling and Distribution Expenses
ABC Cost Total Cost Total Activity Activity Rate (Total cost/activity)
Customer Delivery                 6,09,000                                       7,000                                                         87 per delivery
Manual processing                 6,16,000                                       8,000                                                         77 per manual order
Electronic processing                 3,30,000                                    15,000                                                         22 per electronic order
Line Item picking                 9,90,000                                 4,40,000                                                            2 per line item picked
Other Org                 6,80,000
Total Cost           32,25,000
Required 3 Total Cost for University and Memorial
University
Activity Measure Activity Cost per activity
(from Req 2) Total Cost
No. of deliveries                             18                                             87                                                   1,566
No. of manual orders                               -                                               77                                                           -  
No. of electronic processing                             10                                             22                                                       220
No. of line items                           110                                                2                                                       248
Total Activity cost for University                                                 2,034
Memorial
Activity Measure Activity Cost per activity
(from Req 2) Total Cost
No. of deliveries                             26                                             87                                                   2,262
No. of manual orders                             50                                             77                                                   3,850
No. of electronic processing                               -                                               22                                                           -  
No. of line items                           230                                                2                                                       518
Total Activity cost for Memorial                                                 6,630
Required 4 Worley\'s cutomer margin
University
Total cost (A+C from Required 1)                    36,034
Total Revenue                    37,734
Net profit                     1,700
Customer margin                        4.51
Memorial
Total cost (A+C from Required 1)                    40,630
Total Revenue                    42,330
Net profit                     1,700
Customer margin                        4.02gNOTE- The Answer is with the assumption that selling and distribution overheads are not added in the cost of $ 34,000 and the same is separately added, therefore accordingly customer margin is different. If some other assumption is taken, the answer would be different
Solution-

Required 1 Total Revenue that Worley received from University and Mumbai
Cost of goods Profit @5% on goods Selling & Distribution cost Total Revenue
A B C
(Refer Required 3) A+B+C
University 34000 1700                                                   2,034                            37,734
Mumbai 34000 1700                                                   6,630                            42,330
Total Revenue                          80,063
Required 2 Current Selling and Distribution Expenses
ABC Cost Total Cost Total Activity Activity Rate (Total cost/activity)
Customer Delivery                 6,09,000                                       7,000                                                         87 per delivery
Manual processing                 6,16,000                                       8,000                                                         77 per manual order
Electronic processing                 3,30,000                                    15,000                                                         22 per electronic order
Line Item picking                 9,90,000                                 4,40,000                                                            2 per line item picked
Other Org                 6,80,000
Total Cost           32,25,000
Required 3 Total Cost for University and Memorial
University
Activity Measure Activity Cost per activity
(from Req 2) Total Cost
No. of deliveries                             18                                             87                                                   1,566
No. of manual orders                               -                                               77                                                           -  
No. of electronic processing                             10                                             22                                                       220
No. of line items                           110                                                2                                                       248
Total Activity cost for University                                                 2,034
Memorial
Activity Measure Activity Cost per activity
(from Req 2) Total Cost
No. of deliveries                             26                                             87                                                   2,262
No. of manual orders                             50                                             77                                                   3,850
No. of electronic processing                               -                                               22                                                           -  
No. of line items                           230                                                2                                                       518
Total Activity cost for Memorial                                                 6,630
Required 4 Worley\'s cutomer margin
University
Total cost (A+C from Required 1)                    36,034
Total Revenue                    37,734
Net profit                     1,700
Customer margin                        4.51
Memorial
Total cost (A+C from Required 1)                    40,630
Total Revenue                    42,330
Net profit                     1,700
Customer margin                        4.02