Question

Pharmax Distributors specializes in the distribution of pharmaceutical products at the retail level. Pharmax's customer base is comprised of three main retail groups: general supermarket chains, large drugstore chains, and small, single store "Ma & Pa' pharmacies. To evaluate the relative profitability of each customer group, Pharmax plans to use an allocation system that recognizes the relative demands that these groups plece on the company's resources. Parmex's chier eccountant examined the firm's support costs and activities and collected the following data for a typical operating period: Total Cost Driver Support Activity Order processing Line Item processing Budgeted Cost 580,000 563,000 1,300 customer orders Store dellvertes 574,000 576,000 20,860 line items 1,630 dellveries 77,000 cartons shipped Carton handling She also gethered the following data for a typical operating period: Customer orders Line Items Deliverles Cartons shipped General Supermarket 240 2,240 110 33,000 Drugstore Chains 360 4,320 320 22,400 Ma & Pa 1,300 14,300 1.200 21,600 REQUIRED (ROUND ALL ALLOCATION RATES TO THE NEAREST CENT AND ALLOCATIONS TO THE NEAREST DOLLAR. 1 Part A (5 tries; 5 points) If Pharmax uses a single-driver sysbarri ta allacate its suppart costs, with number of customer orders as the single driver, how much would be allocated to its Drugstore Chain customers? Submit Answer Tries 0/5 Part B (5 tries, 5 polnts) If Pharmax uses an activity-based custing system to allocate its overhead costs, how much would be allocated to its General Supermarket customers? Sutrnil Aris Y Tres 0/5

Answer 1

Part A

Amount allocated to Drugstone Chain customers = $60200

Manufacturing overhead = order processing + line item processing + store deliveries + carton handling = 88000+63000+74000+76000 = $301000

Total customer orders = 140+360+1300 = 1800

Amount allocated to Drugstone Chain customers = 301000/1800*360 = $60200

Part B

Amount allocated to General supermarket customers = $51175

Amount allocated = activity performed * activity rate

Amount allocated to General supermarket customers = (88000/1800*140)+(63000/20860*2240)+(74000/1630*110)+(76000/77000*33000) = $51175