Homework Help is Here – Start Your Trial Now!
Business
Operations Management
E4-21A Compare traditional and ABC allocations at a pharmacy (Learning Objective 2) 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; phar- macists can spend between five minutes and six hours on a prescription order. Tradition- ally, 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 gath- ered the following information: Cost Pools Total Annual Estimated Cost Total Annual Estimated Cost Driver Activity Pharmacy occupancy costs (utilities, rent, and other costs). Cost Driver Technician hours.. $ 102,000 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

E4-21A Compare traditional and ABC allocations at a pharmacy (Learning Objective 2) 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; phar- macists can spend between five minutes and six hours on a prescription order. Tradition- ally, 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 gath- ered the following information: Cost Pools Total Annual Estimated Cost Total Annual Estimated Cost Driver Activity Pharmacy occupancy costs (utilities, rent, and other costs). Cost Driver Technician hours.. $ 102,000 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

Practical Management Science
Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
Section: Chapter Questions
Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...
See similar textbooks
icon
Related questions
Question
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? 3. How much pharmacy overhead would be allocated to customer order number 1248 if traditional overhead allocation based on the number of prescriptions is used? 4. What are the following cost pool allocation rates: a. Pharmacy occupancy costs b. Packaging supplies c. Professional training and insurance costs 5. How much would be allocated to customer order number 1247 if activity-based costing (ABC) is used to allocate the pharmacy overhead costs? 6. How much would be allocated to customer order number 1248 if activity-based costing (ABC) is used to allocate the pharmacy overhead costs? 7. Which allocation method (traditional or activity-based costing) would produce a more accurate product cost? Explain your answer.
Transcribed Image Text: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? 3. How much pharmacy overhead would be allocated to customer order number 1248 if traditional overhead allocation based on the number of prescriptions is used? 4. What are the following cost pool allocation rates: a. Pharmacy occupancy costs b. Packaging supplies c. Professional training and insurance costs 5. How much would be allocated to customer order number 1247 if activity-based costing (ABC) is used to allocate the pharmacy overhead costs? 6. How much would be allocated to customer order number 1248 if activity-based costing (ABC) is used to allocate the pharmacy overhead costs? 7. Which allocation method (traditional or activity-based costing) would produce a more accurate product cost? Explain your answer.
E4-21A Compare traditional and ABC allocations at a pharmacy (Learning Objective 2) 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; phar- macists can spend between five minutes and six hours on a prescription order. Tradition- ally, 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 gath- ered the following information: Total Annual Estimated Cost Total Annual Estimated Cost Driver Activity Cost Pools Cost Driver Pharmacy occupancy costs (utilities, rent, and other costs). $ 102,000 Technician hours... 85,000 S 22,000 Packaging supplies (bottles, bags, and other packaging. Professional training and insurance costs. Number of prescriptions.. 20,000 ...... $ 108.000 Pharmacist hours. 27,000 Total pharmacy overhead.. $ 232,000 The clerk for Wilmington has gathered the following information regarding two rece pharmacy orders: еcent Customer Order Number Number of Technician Hours Prescriptions Pharmacist Hours 1247 0.5 3.0 1248 0.5 3 1.5
Transcribed Image Text:E4-21A Compare traditional and ABC allocations at a pharmacy (Learning Objective 2) 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; phar- macists can spend between five minutes and six hours on a prescription order. Tradition- ally, 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 gath- ered the following information: Total Annual Estimated Cost Total Annual Estimated Cost Driver Activity Cost Pools Cost Driver Pharmacy occupancy costs (utilities, rent, and other costs). $ 102,000 Technician hours... 85,000 S 22,000 Packaging supplies (bottles, bags, and other packaging. Professional training and insurance costs. Number of prescriptions.. 20,000 ...... $ 108.000 Pharmacist hours. 27,000 Total pharmacy overhead.. $ 232,000 The clerk for Wilmington has gathered the following information regarding two rece pharmacy orders: еcent Customer Order Number Number of Technician Hours Prescriptions Pharmacist Hours 1247 0.5 3.0 1248 0.5 3 1.5
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 2 steps

SEE SOLUTIONCheck out a sample Q&A here
Blurred answer
Similar questions
Recommended textbooks for you
Practical Management Science
Practical Management Science
Operations Management
ISBN:
9781337406659
Author:
WINSTON, Wayne L.
Publisher:
Cengage,
Operations Management
Operations Management
Operations Management
ISBN:
9781259667473
Author:
William J Stevenson
Publisher:
McGraw-Hill Education
Operations and Supply Chain Management (Mcgraw-hi…
Operations and Supply Chain Management (Mcgraw-hi…
Operations Management
ISBN:
9781259666100
Author:
F. Robert Jacobs, Richard B Chase
Publisher:
McGraw-Hill Education
Business in Action
Business in Action
Operations Management
ISBN:
9780135198100
Author:
BOVEE
Publisher:
PEARSON CO
Purchasing and Supply Chain Management
Purchasing and Supply Chain Management
Operations Management
ISBN:
9781285869681
Author:
Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. Patterson
Publisher:
Cengage Learning
Production and Operations Analysis, Seventh Editi…
Production and Operations Analysis, Seventh Editi…
Operations Management
ISBN:
9781478623069
Author:
Steven Nahmias, Tava Lennon Olsen
Publisher:
Waveland Press, Inc.
SEE MORE TEXTBOOKS