Med Max buys surgical supplies from a variety of manufacturers and then resells
ID: 2612033 • 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 imploment an activity company broke its selling and administrative expenses into four activities as shown below costing system to improve its understanding of the costs incurred to serve each hospital. The Total Activity Measur S 361,900 4,700 deliveries Customer deliveries Manual order processing Electronic order processing Line item picking Number of deliveries Number of manual orders Number of electronic orders Number of line items picked 266,400 191,540 518,000 3,700 orders 12,200 orders 370,000 line items s 1,337,840 Total selling and administrative expenses 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 Activity Measure Number of deliveries Number of manual orders Number of electronic orders Number of line items picked 15 30 60 20 130 290 O Type here to searchExplanation / Answer
Answer:
1
Compute the activity rate for each activity cost pool
Customer delivery
77
per dilivery
Mannual Order
72
per Manual Order
Electronic Order processing
15.7
per Electronic Order
Line itaem processing
1.4
per Line iteam picked
Working notes for the above answwer
Cost
/
Activity
$
Activity Rate
Customer delivery
361900
/
4700
77
per dilivery
Mannual Order
266400
/
3700
72
per Manual Order
Electronic Order processing
191540
/
12200
15.7
per Electronic Order
Line itaem processing
518000
/
370,000
1.4
per Line iteam picked
1337840
_______________________________________________
2
City General
Activity Cost Pool
ABC
Cost
Customer delivery
1155
Mannual Order
0
Electronic Order processing
314
Line itaem processing
182
Total Activity Cost
1651
Working notes for the above answwer
Activity Cost Pool
Activity
rate
x
Activity
ABC
Cost
Customer delivery
77
x
15
1155
Mannual Order
72
x
0
0
Electronic Order processing
15.7
x
20
314
Line itaem processing
1.4
x
130
182
_________________________________________
3
Country General
Activity Cost Pool
ABC
Cost
Customer delivery
2310
Mannual Order
4320
Electronic Order processing
0
Line itaem processing
406
Total Activity Cost
7036
Working notes for the above answwer
Activity Cost Pool
Activity
rate
x
Activity
ABC
Cost
Customer delivery
77
x
30
2310
Mannual Order
72
x
60
4320
Electronic Order processing
15.7
x
0
0
Line itaem processing
1.4
x
290
406
Customer delivery
77
per dilivery
Mannual Order
72
per Manual Order
Electronic Order processing
15.7
per Electronic Order
Line itaem processing
1.4
per Line iteam picked