For years, Worley believed that the 7% markup covered its selling and administrative expenses and provided...

 

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For years, Worley believed that the 7% 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: Activity Cost Pool (Activity Measure) Customer deliveries (Number of deliveries) Manual order processing (Number of manual orders) Electronic order processing (Number of electronic orders) Line item picking (Number of line items picked) Other organization-sustaining costs (None) Total selling and administrative expenses Total Cost Total Activity $ 267,000 3,000 deliveries 5,000 orders 365,000 264,000 607,500 11,000 orders 450,000 line items 700,000 $ 2,203,500 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 $40,000 to buy from manufacturers): Activity Measure Number of deliveries Number of manual orders Number of electronic orders Number of line items picked Required: Activity University 12 Memorial 29 0 42 11 200 0 230 1. Compute the total revenue that Worley would receive from University and Memorial. 2. Compute the activity rate for each activity cost pool. 3. Compute the total activity costs that would be assigned to University and Memorial. 4. Compute Worley's customer margin for University and Memorial. (Hint. Do not overlook the $40,000 cost of goods sold that Worley incurred serving each hospital.) Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Compute the activity rate for each activity cost pool. (Round your answers to 2 decimal places.) Activity Cost Pool Customer deliveries Activity Rate per delivery per manual order Manual order processing Electronic order processing per electronic order Line item picking per line item picked For years, Worley believed that the 7% 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: Activity Cost Pool (Activity Measure) Customer deliveries (Number of deliveries) Manual order processing (Number of manual orders) Electronic order processing (Number of electronic orders) Line item picking (Number of line items picked) Other organization-sustaining costs (None) Total selling and administrative expenses Total Cost Total Activity $ 267,000 3,000 deliveries 5,000 orders 365,000 264,000 607,500 11,000 orders 450,000 line items 700,000 $ 2,203,500 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 $40,000 to buy from manufacturers): Activity Measure Number of deliveries Number of manual orders Number of electronic orders Number of line items picked Required: Activity University 12 Memorial 29 0 42 11 200 0 230 1. Compute the total revenue that Worley would receive from University and Memorial. 2. Compute the activity rate for each activity cost pool. 3. Compute the total activity costs that would be assigned to University and Memorial. 4. Compute Worley's customer margin for University and Memorial. (Hint. Do not overlook the $40,000 cost of goods sold that Worley incurred serving each hospital.) Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Compute the activity rate for each activity cost pool. (Round your answers to 2 decimal places.) Activity Cost Pool Customer deliveries Activity Rate per delivery per manual order Manual order processing Electronic order processing per electronic order Line item picking per line item picked

Answer rating: 100% (QA)

To compute the activity rate for each activity cost pool we ... View the full answer