Question

Wilmington Pharmacy, part of a large chain of pharmacies, fills a variety of prescriptions for customers. The complexity of prescriptions filled by Wilmington varies widely; pharmacists can spend between five minutes and six hours on a prescription order. Tradition-ally, the pharmacy has allocated its overhead based on the number of prescriptions in each order. For example, a customer may bring in three prescriptions to be filled on the same day; the pharmacy considers this to be one order. The pharmacy chain’s controller is exploring whether activity- based costing (ABC) may better allocate the pharmacy overhead costs to pharmacy orders. The controller has gathered the following information: Cost Pools


The clerk for Wilmington has gathered the following information regarding two recent pharmacy orders: Customer Order



Requirements
1. What is the traditional overhead rate based on the number of prescriptions?
2. How much pharmacy overhead would be allocated to customer order number 1247 if traditional overhead allocation based on the number of prescriptions is used?
3. How much pharmacy overhead would be allocated to customer order number 1248 if traditional overhead allocation based on the number of prescriptions is used?
4. What are the following cost pool allocation rates: a. Pharmacy occupancy costs b. Packaging supplies c. Professional training and insurance costs
5. How much would be allocated to customer order number 1247 if activity- based ­costing (ABC) is used to allocate the pharmacy overhead costs?
6. How much would be allocated to customer order number 1248 if activity- based ­costing (ABC) is used to allocate the pharmacy overhead costs?
7. Which allocation method (traditional or activity- based costing) would produce a more accurate product cost? Explain youranswer.


$1.99
Sales9
Views219
Comments0
  • CreatedAugust 27, 2014
  • Files Included
Post your question
5000