Med Max buys surgical supplies from a variety of manufacturers and then resells
ID: 2391953 • 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 company broke its selling and administrative expenses into four activities as shown below:
Compute the total activity costs that would be assigned to City General and County General. (Do not round intermediate calculations.)
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:
Explanation / Answer
1)Activity rate for each activity cost pool Activity cost pool Activity rate Customer deliveries 400,000/5000= $80.00 per delivery Manual order processing 300,000/4000= $75.00 per order Electronic order processing 200,000/12,500= $16.00 per order Line item picking 500,000/400,000= $1.25 per line item 2)Activity Cost assigned to City General Rate Activity total Customer deliveries $80.00 10 $800.00 Manual order processing $75.00 0 $0.00 Electronic order processing $16.00 10 $160.00 Line item picking $1.25 100 $125.00 $1,085.00 Activity cost assinged to City General $1,085 answer Activity cost assinged to County General Rate Activity total Customer deliveries $80.00 20 $1,600.00 Manual order processing $75.00 40 $3,000.00 Electronic order processing $16.00 0 $0.00 Line item picking $1.25 260 $325.00 Activity cost assinged to COuntryGeneral $4,925.00