Question

Pharmax Distributors specializes in the distribution of pharmaceutical products at the retail leve Pharmax's customer base is comprised of three main retail groups: general supermarket chains, arge 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 place on the company's resources. Parmax's chief accountant examined the firm's support costs and activities and collected the following data for a typical operating period Support Activity Orcer processing Line item processing Store deliveries Carton handling Budgeted Cost 588,000 $66,000 570,000 $68,000 Total Cost Driver 2,020 customer orders 22,260 line tems 1,500 deliveries 80,850 cartons shipped She also gathered the following dlata for a typical operating period: Customer orders Line items Deliveries Cartons shipped General Supermarket 140 1,960 120 37.200 Drugstore Chains 380 3,800 330 24.750 Ma & Pa 1,500 16,500 1,050 18,900 REQUIRED ROUND ALL ALLOCATION RATES TO THE NEAREST CENT AND ALLOCATIONS TO THE NEAREST DOLLAR.] Part A (5 tries; 5 points) f Pharmax uses a single-driver system to allocate its support costs, with number of customer orders as the single driver, how much would be allocatec to its Drugstore Chain customers? Submit Aswr Tries 05 Part B (S tries; 5 points) Submit Arswer Tries Os If Pharmax uses an activity-based costing systerm to allocate its overhead costs, how much would ba allocated to its General Superrmarket custorners?

Answer 1

Solution :-

Part-1 :-

total support cost	=$88000+$66000+$70000+$68000 = $2,92,000
total number of customer orders	2020
support cost per customer order	=292000/2020 =$144.55 per customer order
number of customer orders of Ma &Pa customers	1500
support costs to be allocated to Ma & Pa customers	= $144.55 * 1500 =$ 216831.68

Therefore, Support costs to be allocated to Ma & Pa customers is $ 216831.68