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 manufacturers and then resells and delivers these supplies to dozens of hospitals. In the face of declining profits, Med Max decided to implement an activity-based costing system to improve its understanding of the costs incurred to serve each hospital. The company broke its selling and administrative expenses into four activities as shown below. Activity Cost Pool Activity Measure Customer deliveries Manual order processing Electronic order processing Line item picking Total selling and administrative expenses Number of deliveries Number of manual orders Number of electronic orders Number of line items picked Total Cost $291,100 Total Activity 4,100 deliveries 204,600 175,160 3,100 orders 11,600 orders 325,500 310,000 line items $ 996,360 Med Max gathered the data below for two of the many hospitals that it serves-City General and County General: Activity Number of deliveries Activity Measure Number of manual orders City General County General 15 30 0 60 Number of electronic orders Number of line items picked 20 B 140 300 Required: 1. Compute the activity rate for each activity cost pool. 2. Compute the total activity costs that would be assigned to City General and County General. 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 implement an activity-based costing system to improve its understanding of the costs incurred to serve each hospital. The company broke its selling and administrative expenses into four activities as shown below. Activity Cost Pool Activity Measure Customer deliveries Manual order processing Electronic order processing Line item picking Total selling and administrative expenses Number of deliveries Number of manual orders Number of electronic orders Number of line items picked Total Cost $291,100 Total Activity 4,100 deliveries 204,600 175,160 3,100 orders 11,600 orders 325,500 310,000 line items $ 996,360 Med Max gathered the data below for two of the many hospitals that it serves-City General and County General: Activity Number of deliveries Activity Measure Number of manual orders City General County General 15 30 0 60 Number of electronic orders Number of line items picked 20 B 140 300 Required: 1. Compute the activity rate for each activity cost pool. 2. Compute the total activity costs that would be assigned to City General and County General.

Answer rating: 100% (QA)

To compute the activity rate for each activity cost pool well divide the total cost of each activity pool by its respective total activity measure 1Co... View the full answer