Compute worley's customer margin for university and memorial

1 3. 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 6%. For example, if a hospital buys supplies from Worley that had cost Worley $100 to buy from manufacturers, Worley would charge the hospital $106 to purchase these supplies. For years, Worley believed that the 6% 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) Customer deliveries (Number of deliveries) Manual order processing (Number of manual orders) Electronic order processing (Number of electronic orders) Line item picking (Number of line items picked) Other organization-sustaining costs (None) Total selling and administrative expenses Total Cost $ 528,000 Total Activity 6,000 deliveries 539,000 7,000 orders 240,000 12,000 orders 1,078,000 490,000 line items 690,000 $ 3,075,000 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 had cost Worley $35,000 to buy from its manufacturers): Activity Activity Measure Number of deliveries Number of manual orders Number of electronic orders Number of line items picked University 14 0 18 180 Memorial 23 43 0 270 Required: 1. Compute the total revenue that Worley would receive from University and Memorial. 2. Compute the activity rate for each activity cost pool. (Round your answers to 2 decimal places.) 2 3. Compute the total activity costs that would be assigned to University and Memorial. (Round your intermediate calculations and final answers to 2 decimal places.) 4. Compute Worley’s customer margin for University and Memorial. (Hint: Do not overlook the $35,000 cost of goods sold that Worley incurred serving each hospital.) (Loss amount should be indicated with a minus sign. Round your intermediate calculations and final answers to 2 decimal places.) Garrison 15e Recheck 2015-01-16 ...
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