Question

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 Electronic order processing Line item picking Total selling and administrative expenses Activity Measure Number of deliveries Number of manual orders Number of electronic orders Number of line items picked Total Cost $ 400,000 300,000 200,000 500,000 $ 1,400,000 Total Activity 5,080 deliveries 4,000 orders 12,500 orders 400,000 line items Med Max gathered the data below for two of the many hospitals that it serves City General and County General: General County General Activity Measure Number of deliveries Number of manual orders Number of electronic orders Number of line itens picked 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 20

please do both of the required parts

Answer 1

Solution 1:

Computation of Activity rates
Activity cost pool	Total Cost	Total Activity	Activity rate
Customer Deliveries	$4,00,000	5000	$80.00	per delivery
manual Order processing	$3,00,000	4000	$75.00	per order
Electronic order processing	$2,00,000	12500	$16.00	per order
Line Item picking	$5,00,000	400000	$1.25	per line item
Total	$14,00,000

Solution 2:

Computation of Overhead assigned to products
	City General			Country General
Activity cost pool	Activity level used	Activity rate	Cost assigned	Activity level used	Activity rate	Cost assigned
Machining	10	80.00	$800.00	20	80.00	$1,600.00
Setups	0	75.00	$0.00	40	75.00	$3,000.00
Product level	10	16.00	$160.00	0	16.00	$0.00
General Factory	100	1.25	$125.00	260	1.25	$325.00
Total Ativity cost assigned			$1,085.00			$4,925.00