Med Max buys surgical supplies from a variety of manufacturers and then resells
ID: 2337829 • Letter: M
Question
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 $ 313,900 4.300 deliveries Number of deliveries Number of manual orders Number of electronic orders Number of line items picked Customer de 224,4003,300 orders 180,540 11,800 orders 379,500 330,000 line items Manual order pro Line item picking Total selling and administrative expenses $ 1,098,340 Med Max gathered the data below for two of the many hospitals that it serves-City General and County General Activity City General General County Number of deliveries 40 80 20 Number of electronic orders 20 120 of line items picked 280 Required: o 2 decimal placesExplanation / Answer
Activity cost pool Activity rate Customer deliveries 73.00 =313900/4300 Manual order processing 68.00 =224400/3300 Electronic order processing 15.30 =180540/11800 Line item picking 1.15 =379500/330000 2 City General: Activity cost pool ABC Cost Customer deliveries 1460 =20*73 Manual order processing 0 Electronic order processing 306 =20*15.3 Line item picking 138 =120*1.15 Total activity costs 1904 County General: Activity cost pool ABC Cost Customer deliveries 2920 =40*73 Manual order processing 5440 =80*68 Electronic order processing 0 Line item picking 322 =280*1.15 Total activity costs 8682