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.
 

Transcribed Image Text:

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

Answer rating: 100% (QA)

Step 1 of 3 A 1 Calculate activity rate for each activity cost pool Total Activit... View the full answer