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Med Max buys surgical supplies from a variety of manufacturers and then resells and delivers these supplies to dozens of hospitals. In he face of declining profits, Med Max decided to implement an activity-based costing system to improve its understanding of the costs ncurred 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 Activity 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: City General 20 0 15 140 County General Total Cost $ 349,600 255,600 188,760 522,000 $ 1,315,960 40 80 e 300 Total Activity 4,600 deliveries 3,600 orders 12,100 orders 360,000 line items 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

Med Max buys surgical supplies from a variety of manufacturers and then resells and delivers these supplies to dozens of hospitals. In he face of declining profits, Med Max decided to implement an activity-based costing system to improve its understanding of the costs ncurred 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 Activity 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: City General 20 0 15 140 County General Total Cost $ 349,600 255,600 188,760 522,000 $ 1,315,960 40 80 e 300 Total Activity 4,600 deliveries 3,600 orders 12,100 orders 360,000 line items 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

Managerial Accounting
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter4: Activity-based Costing
Section: Chapter Questions
Problem 6PA: Product costing and decision analysis for a service company Pleasant Stay Medical Inc. wishes to...
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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 Activity 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: City General 20 0 15 140 Total Cost $ 349,600 255,600 188,760 522,000 $ 1,315,960 County General 40 80 0 300 Total Activity 4,600 deliveries 3,600 orders 12,100 orders 360,000 line items 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.
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 Activity 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: City General 20 0 15 140 Total Cost $ 349,600 255,600 188,760 522,000 $ 1,315,960 County General 40 80 0 300 Total Activity 4,600 deliveries 3,600 orders 12,100 orders 360,000 line items 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.
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