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:

Med Max gathered the data below for two of the many hospitals that it serves—City General and County General:

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.
3. Describe the purchasing behaviors that are likely to increase Med Max’s cost to serve its customers.

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Activity Cost Pool Customer deliveries... Manual order processing Electronic order processing Line Item picking.... Total selling and administrative expenses. Activity Measure Number of deliverles Number of manual orders Number of electronic orders Number of line Items picked Total Cost Total Activity $ 400,000 5,000 deliverles 300,000 4,000 orders 200,000 12,500 orders 500,000 400,000 line Items $1,400,000