Med Max buys surgical supplies from a variety of manufacturers and then resells and delivers these supplies
Question:
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 activitybased 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 Total Cost Total Activity
Customer deliveries Number of deliveries $ deliveries
Manual order processing Number of manual orders orders
Electronic order processing Number of electronic orders orders
Line item picking Number of line items picked line items
Total selling and administrative expenses $
Med Max gathered the data below for two of the many hospitals that it servesCity General and County General:
Activity Measure Activity
City General County General
Number of deliveries
Number of manual orders
Number of electronic orders
Number of line items picked
Required:
Compute the activity rate for each activity cost pool.
Compute the total activity costs that would be assigned to City General and County General.