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: Activity Cost Pool Customer deliveries Manual order processing Total Cost $ 400,000 300,000 200,000 500,000 Electronic order processing Line item picking Total selling and administrative expenses $ 1,400,000 Med Max gathered the data below for two of the many hospitals that it serves-City General and County General: Activity Measure Number of deliveries Number of manual orders Number of electronic orders. Number of line items picked Required 1 Activity Required 2 City General 10 0 10 100 County General Activity Cost Pool Customer deliveries 20 40 Required: 1. Compute the activity rate for each activity cost pool. 2. Compute the total activity costs that would be assigned to City General and County General. 0 260 Complete this question by entering your answers in the tabs below. Activity Measure Number of deliveries Number of manual orders Number of electronic orders Number of line items picked Compute the activity rate for each activity cost pool. (Round your answers to 2 decimal places.) Activity Rate per delivery < Prev 4 of 5 www HH Total Activity 5,000 deliveries 4,000 orders 12,500 orders 400,000 line items 11 Next >
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: Activity Cost Pool Customer deliveries Manual order processing Total Cost $ 400,000 300,000 200,000 500,000 Electronic order processing Line item picking Total selling and administrative expenses $ 1,400,000 Med Max gathered the data below for two of the many hospitals that it serves-City General and County General: Activity Measure Number of deliveries Number of manual orders Number of electronic orders. Number of line items picked Required 1 Activity Required 2 City General 10 0 10 100 County General Activity Cost Pool Customer deliveries 20 40 Required: 1. Compute the activity rate for each activity cost pool. 2. Compute the total activity costs that would be assigned to City General and County General. 0 260 Complete this question by entering your answers in the tabs below. Activity Measure Number of deliveries Number of manual orders Number of electronic orders Number of line items picked Compute the activity rate for each activity cost pool. (Round your answers to 2 decimal places.) Activity Rate per delivery < Prev 4 of 5 www HH Total Activity 5,000 deliveries 4,000 orders 12,500 orders 400,000 line items 11 Next >
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Transcribed Image Text: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:
Activity Cost Pool
Customer deliveries
Manual order processing
Activity Measure
Number of deliveries
Number of manual orders
Number of electronic orders.
Number of line items picked
Electronic order processing
Line item picking
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:
Required 1
Required 2
Activity
City
General
10
0
10
100
Activity Cost Pool
Customer deliveries
County
General
Required:
1. Compute the activity rate for each activity cost pool.
2. Compute the total activity costs that would be assigned to City General and County General..
Activity Measure
Number of deliveries
Number of manual orders
Number of electronic orders
Number of line items picked
20
40
0
260
Complete this question by entering your answers in the tabs below.
Compute the activity rate for each activity cost pool. (Round your answers to 2 decimal places.)
Activity Rate
per delivery
< Prev
#
4 of 5
Total Cost
$ 400,000
300,000
200,000
500,000
$ 1,400,000
Next >
Total Activity
5,000 deliveries
4,000 orders
12,500 orders
400,000 line items
Transcribed Image Text:Required:
1. Compute the activity rate for each activity cost pool.
2. Compute the total activity costs that would be assigned to City General and County General.
Complete this question by entering your answers in the tabs below.
Required 1 Required 2
Compute the activity rate for each activity cost pool. (Round your answers to 2 decimal places.)
Activity Rate
per delivery
per manual order
per electronic order
per line item picked
Activity Cost Pool
Customer deliveries
Manual order processing
Electronic order processing
Line item picking
<
Required 1
Required 2 >
4 of 5
++
Next >
Expert Solution
Step 1
Activity-based costing (ABC):
It is a costing method in which overhead and indirect costs are assigned to products or services on the basis of the actual consumption of the activities by each product or service. ABC method assigns more indirect costs into direct costs compared to the conventional costing method.
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