7) Wilmington Pharmacy, part of a large chain of pharmacies, fills a variety of prescriptions for customers. The complexity of prescriptions filled by Wilmington varies widely; pharmacists can spend between five minutes and six hours on a prescription order. Traditionally, the pharmacy has allocated its overhead based on the number of prescriptions in each order. For example, a customer may bring in three prescriptions to be filled on the same day; the pharmacy considers this to be one order. The pharmacy chain's controller is exploring whether activity-based costing (ABC) may better allocate the pharmacy overhead costs to pharmacy orders. The controller has gathered the following information: Cost Pools Total Annual Estimated Cost Cost Driver Total Annual Estimated Cost Driver Activity Pharmacy occupancy costs (utilities, rent, and other costs) $ 102,000 Technician hours 85,000 Packaging supplies (bottles, bags, and other packaging) $ 22,000 Number of prescriptions 20,000 Professional training and insurance $ 108,000 Pharmacist hours 27,000 costs Total pharmacy overhead S232,000 The clerk for Wilmington has gathered the following information regarding two recent pharmacy orders: Customer Order Number Technician Hours Number of Prescriptions Pharmacist Hours 1247 0.5 5 3.0 1248 0.5 3 1.5 Requirements 1. What is the traditional overhead rate based on the number of prescriptions? 2. How much pharmacy overhead would be allocated to customer order number 1247 if traditional overhead allocation based on the number of prescriptions is used? 6
7) Wilmington Pharmacy, part of a large chain of pharmacies, fills a variety of prescriptions for customers. The complexity of prescriptions filled by Wilmington varies widely; pharmacists can spend between five minutes and six hours on a prescription order. Traditionally, the pharmacy has allocated its overhead based on the number of prescriptions in each order. For example, a customer may bring in three prescriptions to be filled on the same day; the pharmacy considers this to be one order. The pharmacy chain's controller is exploring whether activity-based costing (ABC) may better allocate the pharmacy overhead costs to pharmacy orders. The controller has gathered the following information: Cost Pools Total Annual Estimated Cost Cost Driver Total Annual Estimated Cost Driver Activity Pharmacy occupancy costs (utilities, rent, and other costs) $ 102,000 Technician hours 85,000 Packaging supplies (bottles, bags, and other packaging) $ 22,000 Number of prescriptions 20,000 Professional training and insurance $ 108,000 Pharmacist hours 27,000 costs Total pharmacy overhead S232,000 The clerk for Wilmington has gathered the following information regarding two recent pharmacy orders: Customer Order Number Technician Hours Number of Prescriptions Pharmacist Hours 1247 0.5 5 3.0 1248 0.5 3 1.5 Requirements 1. What is the traditional overhead rate based on the number of prescriptions? 2. How much pharmacy overhead would be allocated to customer order number 1247 if traditional overhead allocation based on the number of prescriptions is used? 6
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
not use ai please
Transcribed Image Text:7) Wilmington Pharmacy, part of a large chain of pharmacies, fills a variety of prescriptions for
customers. The complexity of prescriptions filled by Wilmington varies widely; pharmacists can
spend between five minutes and six hours on a prescription order. Traditionally, the pharmacy has
allocated its overhead based on the number of prescriptions in each order. For example, a customer
may bring in three prescriptions to be filled on the same day; the pharmacy considers this to be
one order. The pharmacy chain's controller is exploring whether activity-based costing (ABC) may
better allocate the pharmacy overhead costs to pharmacy orders. The controller has gathered the
following information:
Cost Pools
Total Annual
Estimated Cost
Cost Driver
Total Annual
Estimated Cost
Driver Activity
Pharmacy occupancy costs (utilities,
rent, and other costs)
$ 102,000
Technician hours
85,000
Packaging supplies (bottles, bags,
and other packaging)
$ 22,000
Number of
prescriptions
20,000
Professional training and insurance
$ 108,000
Pharmacist hours
27,000
costs
Total pharmacy overhead
S232,000
The clerk for Wilmington has gathered the following information regarding two recent pharmacy
orders:
Customer Order
Number
Technician Hours
Number of
Prescriptions
Pharmacist Hours
1247
0.5
5
3.0
1248
0.5
3
1.5
Requirements
1. What is the traditional overhead rate based on the number of prescriptions?
2. How much pharmacy overhead would be allocated to customer order number 1247 if
traditional overhead allocation based on the number of prescriptions is used?
6
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 2 steps
Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education