Homework Help is Here – Start Your Trial Now!
Business
Accounting
QUESTION: B WORLEY COMPANY BUYS SURGICAL SUPPLIES FROM A VARIETY OF MANUFACTURERS AND THEN RESELLS AND DELIVERS THESE SUPPLIES TO HUNDREDS OF HOSPITALS. WORLEY SETS ITS PRICES FOR ALL HOSPITALS BY MARKING UP ITS COST OF GOODS SOLD TO THOSE HOSPITALS BY 5%. FOR EXAMPLE, IF A HOSPITAL BUYS SUPPLIES FROM WORLEY THAT HAD COST WORLEY $100 TO BUY FROM MANUFACTURERS, WORLEY WOULD CHARGE THE HOSPITAL $105 TO PURCHASE THESE SUPPLIES. FOR YEARS, WORLEY BELIEVED THAT THE 5% MARKUP COVERED ITS SELLING AND ADMINISTRATIVE EXPENSES AND PROVIDED A REASONABLE PROFIT. HOWEVER, IN THE FACE OF DECLINING PROFITS WORLEY DECIDED TO IMPLEMENT AN ACTIVITY-BASED COSTING SYSTEM TO HELP IMPROVE ITS UNDERSTANDING OF CUSTOMER PROFITABILITY. THE COMPANY BROKE ITS SELLING AND ADMINISTRATIVE EXPENSES INTO FIVE ACTIVITIES AS SHOWN BELOW: ACTIVITY COST POOL (ACTIVITY MEASURE) TOTAL COST TOTAL ACTIVITY CUSTOMER DELIVERIES (NUMBER OF DELIVERIES) $500,000 5,000 DELIVERIES MANUAL ORDER PROCESSING (NUMBER OF MANUAL ORDERS) ELECTRONIC ORDER PROCESSING (NUMBER OF ELECTRONIC ORDERS) $248,000 4,000 ORDERS $200,000 12,500 ORDERS LINE ITEM PICKING (NUMBER OF LINE ITEMS PICKED) $450,000 450,000 LINE ITEMS OTHER ORGANIZATION-SUSTAINING COSTS (NONE) TOTAL SELLING AND ADMINISTRATIVE EXPENSES 602,000 $2,000,000 - WORLEY GATHERED THE DATA BELOW FOR TWO OF THE MANY HOSPITALS THAT IT SERVES UNIVERSITY AND MEMORIAL (BOTH HOSPITALS PURCHASED A TOTAL QUANTITY OF MEDICAL SUPPLIES THAT COST WORLEY $30,000 TO BUY FROM ITS MANUFACTURERS): ACTIVITY MEASURE ACTIVITY UNIVERSITY MEMORIAL NUMBER OF DELIVERIES 10 25 NUMBER OF MANUAL ORDERS 0 30 NUMBER OF ELECTRONIC ORDERS 15 0 NUMBER OF LINE ITEMS PICKED 120 250 COMPUTE THE ACTIVITY RATE FOR EACH ACTIVITY COST POOL.

QUESTION: B WORLEY COMPANY BUYS SURGICAL SUPPLIES FROM A VARIETY OF MANUFACTURERS AND THEN RESELLS AND DELIVERS THESE SUPPLIES TO HUNDREDS OF HOSPITALS. WORLEY SETS ITS PRICES FOR ALL HOSPITALS BY MARKING UP ITS COST OF GOODS SOLD TO THOSE HOSPITALS BY 5%. FOR EXAMPLE, IF A HOSPITAL BUYS SUPPLIES FROM WORLEY THAT HAD COST WORLEY $100 TO BUY FROM MANUFACTURERS, WORLEY WOULD CHARGE THE HOSPITAL $105 TO PURCHASE THESE SUPPLIES. FOR YEARS, WORLEY BELIEVED THAT THE 5% MARKUP COVERED ITS SELLING AND ADMINISTRATIVE EXPENSES AND PROVIDED A REASONABLE PROFIT. HOWEVER, IN THE FACE OF DECLINING PROFITS WORLEY DECIDED TO IMPLEMENT AN ACTIVITY-BASED COSTING SYSTEM TO HELP IMPROVE ITS UNDERSTANDING OF CUSTOMER PROFITABILITY. THE COMPANY BROKE ITS SELLING AND ADMINISTRATIVE EXPENSES INTO FIVE ACTIVITIES AS SHOWN BELOW: ACTIVITY COST POOL (ACTIVITY MEASURE) TOTAL COST TOTAL ACTIVITY CUSTOMER DELIVERIES (NUMBER OF DELIVERIES) $500,000 5,000 DELIVERIES MANUAL ORDER PROCESSING (NUMBER OF MANUAL ORDERS) ELECTRONIC ORDER PROCESSING (NUMBER OF ELECTRONIC ORDERS) $248,000 4,000 ORDERS $200,000 12,500 ORDERS LINE ITEM PICKING (NUMBER OF LINE ITEMS PICKED) $450,000 450,000 LINE ITEMS OTHER ORGANIZATION-SUSTAINING COSTS (NONE) TOTAL SELLING AND ADMINISTRATIVE EXPENSES 602,000 $2,000,000 - WORLEY GATHERED THE DATA BELOW FOR TWO OF THE MANY HOSPITALS THAT IT SERVES UNIVERSITY AND MEMORIAL (BOTH HOSPITALS PURCHASED A TOTAL QUANTITY OF MEDICAL SUPPLIES THAT COST WORLEY $30,000 TO BUY FROM ITS MANUFACTURERS): ACTIVITY MEASURE ACTIVITY UNIVERSITY MEMORIAL NUMBER OF DELIVERIES 10 25 NUMBER OF MANUAL ORDERS 0 30 NUMBER OF ELECTRONIC ORDERS 15 0 NUMBER OF LINE ITEMS PICKED 120 250 COMPUTE THE ACTIVITY RATE FOR EACH ACTIVITY COST POOL.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
See similar textbooks
icon
Related questions
Question
100%
QUESTION: B WORLEY COMPANY BUYS SURGICAL SUPPLIES FROM A VARIETY OF MANUFACTURERS AND THEN RESELLS AND DELIVERS THESE SUPPLIES TO HUNDREDS OF HOSPITALS. WORLEY SETS ITS PRICES FOR ALL HOSPITALS BY MARKING UP ITS COST OF GOODS SOLD TO THOSE HOSPITALS BY 5%. FOR EXAMPLE, IF A HOSPITAL BUYS SUPPLIES FROM WORLEY THAT HAD COST WORLEY $100 TO BUY FROM MANUFACTURERS, WORLEY WOULD CHARGE THE HOSPITAL $105 TO PURCHASE THESE SUPPLIES. FOR YEARS, WORLEY BELIEVED THAT THE 5% MARKUP COVERED ITS SELLING AND ADMINISTRATIVE EXPENSES AND PROVIDED A REASONABLE PROFIT. HOWEVER, IN THE FACE OF DECLINING PROFITS WORLEY DECIDED TO IMPLEMENT AN ACTIVITY-BASED COSTING SYSTEM TO HELP IMPROVE ITS UNDERSTANDING OF CUSTOMER PROFITABILITY. THE COMPANY BROKE ITS SELLING AND ADMINISTRATIVE EXPENSES INTO FIVE ACTIVITIES AS SHOWN BELOW: ACTIVITY COST POOL (ACTIVITY MEASURE) TOTAL COST TOTAL ACTIVITY CUSTOMER DELIVERIES (NUMBER OF DELIVERIES) $500,000 5,000 DELIVERIES MANUAL ORDER PROCESSING (NUMBER OF MANUAL ORDERS) ELECTRONIC ORDER PROCESSING (NUMBER OF ELECTRONIC ORDERS) $248,000 4,000 ORDERS $200,000 12,500 ORDERS LINE ITEM PICKING (NUMBER OF LINE ITEMS PICKED) $450,000 450,000 LINE ITEMS OTHER ORGANIZATION-SUSTAINING COSTS (NONE) TOTAL SELLING AND ADMINISTRATIVE EXPENSES 602,000 $2,000,000 - WORLEY GATHERED THE DATA BELOW FOR TWO OF THE MANY HOSPITALS THAT IT SERVES UNIVERSITY AND MEMORIAL (BOTH HOSPITALS PURCHASED A TOTAL QUANTITY OF MEDICAL SUPPLIES THAT COST WORLEY $30,000 TO BUY FROM ITS MANUFACTURERS): ACTIVITY MEASURE ACTIVITY UNIVERSITY MEMORIAL NUMBER OF DELIVERIES 10 25 NUMBER OF MANUAL ORDERS 0 30 NUMBER OF ELECTRONIC ORDERS 15 0 NUMBER OF LINE ITEMS PICKED 120 250 COMPUTE THE ACTIVITY RATE FOR EACH ACTIVITY COST POOL.
Transcribed Image Text:QUESTION: B WORLEY COMPANY BUYS SURGICAL SUPPLIES FROM A VARIETY OF MANUFACTURERS AND THEN RESELLS AND DELIVERS THESE SUPPLIES TO HUNDREDS OF HOSPITALS. WORLEY SETS ITS PRICES FOR ALL HOSPITALS BY MARKING UP ITS COST OF GOODS SOLD TO THOSE HOSPITALS BY 5%. FOR EXAMPLE, IF A HOSPITAL BUYS SUPPLIES FROM WORLEY THAT HAD COST WORLEY $100 TO BUY FROM MANUFACTURERS, WORLEY WOULD CHARGE THE HOSPITAL $105 TO PURCHASE THESE SUPPLIES. FOR YEARS, WORLEY BELIEVED THAT THE 5% MARKUP COVERED ITS SELLING AND ADMINISTRATIVE EXPENSES AND PROVIDED A REASONABLE PROFIT. HOWEVER, IN THE FACE OF DECLINING PROFITS WORLEY DECIDED TO IMPLEMENT AN ACTIVITY-BASED COSTING SYSTEM TO HELP IMPROVE ITS UNDERSTANDING OF CUSTOMER PROFITABILITY. THE COMPANY BROKE ITS SELLING AND ADMINISTRATIVE EXPENSES INTO FIVE ACTIVITIES AS SHOWN BELOW: ACTIVITY COST POOL (ACTIVITY MEASURE) TOTAL COST TOTAL ACTIVITY CUSTOMER DELIVERIES (NUMBER OF DELIVERIES) $500,000 5,000 DELIVERIES MANUAL ORDER PROCESSING (NUMBER OF MANUAL ORDERS) ELECTRONIC ORDER PROCESSING (NUMBER OF ELECTRONIC ORDERS) $248,000 4,000 ORDERS $200,000 12,500 ORDERS LINE ITEM PICKING (NUMBER OF LINE ITEMS PICKED) $450,000 450,000 LINE ITEMS OTHER ORGANIZATION-SUSTAINING COSTS (NONE) TOTAL SELLING AND ADMINISTRATIVE EXPENSES 602,000 $2,000,000 - WORLEY GATHERED THE DATA BELOW FOR TWO OF THE MANY HOSPITALS THAT IT SERVES UNIVERSITY AND MEMORIAL (BOTH HOSPITALS PURCHASED A TOTAL QUANTITY OF MEDICAL SUPPLIES THAT COST WORLEY $30,000 TO BUY FROM ITS MANUFACTURERS): ACTIVITY MEASURE ACTIVITY UNIVERSITY MEMORIAL NUMBER OF DELIVERIES 10 25 NUMBER OF MANUAL ORDERS 0 30 NUMBER OF ELECTRONIC ORDERS 15 0 NUMBER OF LINE ITEMS PICKED 120 250 COMPUTE THE ACTIVITY RATE FOR EACH ACTIVITY COST POOL.
Expert 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
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education
SEE MORE TEXTBOOKS