Exercise $5-10($Algo$)$ Customer Profitability Analysis $[$LO$5-3,$ LO$5-4,$ LO$5-5]$

Worley Company buys surgical supplies from a variety of manufacturers and then resells and delivers these supplies to hundreds of

hospitals. Worley sets its prices for all hospitals by marking up its cost of goods sold to those hospitals by $6\%.$ For example, if a hospital

buys supplies from Worley that cost Worley $$100$ to buy from manufacturers, Worley would charge the hospital $$106$ to purchase these

supplies.

For years, Worley believed that the $6\%$ markup covered its selling and administrative expenses and provided a reasonable profit.

However, in the face of declining profits, Worley decided to implement an activity$-$based costing system to help improve its

understanding of customer profitability. The company broke its selling and administrative expenses into five activities as shown:

Worley gathered the data below for two of the many hospitals that it serves$-$University and Memorial $($each hospital purchased

medical supplies that had cost Worley $$38,000$ to buy from manufacturers$)$:

Required:

Compute the total revenue that Worley would receive from University and Memorial.

Compute the activity rate for each activity cost pool.

Compute the total activity costs that would be assigned to University and Memorial.

Compute Worley's customer margin for University and Memorial. $($Hint$.$ Do not overlook the $$38,000$ cost of goods sold that Worley

incurred serving each hospital.$)$

Complete this question by entering your answers in the tabs below.

Compute the total revenue that Worley would receive from University and Memorial.

Total Revenue