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only answer questions 3 and 4

only answer questions 3 and 4

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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only answer questions 3 and 4

**Educational Content** --- **3. Calculation of Total Activity Costs** Compute the total activity costs that would be assigned to University and Memorial. **4. Calculation of Customer Margin** Compute Worley's customer margin for University and Memorial. (Hint: Do not overlook the $32,000 cost of goods sold that Worley incurred serving each hospital.) --- **Note to Students:** In these questions, ensure you carefully analyze the activity costs and customer margins to provide accurate financial computations for both University and Memorial.
Transcribed Image Text:**Educational Content** --- **3. Calculation of Total Activity Costs** Compute the total activity costs that would be assigned to University and Memorial. **4. Calculation of Customer Margin** Compute Worley's customer margin for University and Memorial. (Hint: Do not overlook the $32,000 cost of goods sold that Worley incurred serving each hospital.) --- **Note to Students:** In these questions, ensure you carefully analyze the activity costs and customer margins to provide accurate financial computations for both University and Memorial.
### AC5200/Summer21/Chapter 7: Homework Problems #### 1. Customer Profitability Analysis Worley Company buys medical supplies from a variety of manufacturers and then resells and delivers these supplies to various hospitals. Worley sets its prices for hospitals by marking up its cost of goods sold to those hospitals by 8%. For example, if a hospital buys supplies from Worley that cost Worley $100 to buy from manufacturers, Worley would charge the hospital $108. For years, Worley believed that the 8% 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 improve its understanding of customer profitability. The company took its selling and administrative expenses for the previous year as shown below: | Activity Cost Pool | Total Activity | Total Cost | |------------------------------------------|-------------------------|---------------| | Customer deliveries (Number of deliveries) | 4,000 deliveries | $328,000 | | Customer telephone orders (Number of manual orders) | 8,000 orders | $624,000 | | Line-item picking (Number of line items picked) | 1,032,000 line items | $640,000 | | Other organization-sustaining costs (None) | - | $1,296,000 | | **Total selling and administrative expenses** | - | **$2,888,000** | 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 $32,000 to buy from its manufacturers): | Activity Measure | University | Memorial | |-----------------------------------------|------------|----------| | Number of deliveries | 13 | 4 | | Number of telephone orders | 10 | 16 | | Number of line items picked | 200 | 300 | **Required** 1. Calculate the total revenue that Worley would receive from University and Memorial. 2. Compute the activity rate for each activity cost pool.
Transcribed Image Text:### AC5200/Summer21/Chapter 7: Homework Problems #### 1. Customer Profitability Analysis Worley Company buys medical supplies from a variety of manufacturers and then resells and delivers these supplies to various hospitals. Worley sets its prices for hospitals by marking up its cost of goods sold to those hospitals by 8%. For example, if a hospital buys supplies from Worley that cost Worley $100 to buy from manufacturers, Worley would charge the hospital $108. For years, Worley believed that the 8% 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 improve its understanding of customer profitability. The company took its selling and administrative expenses for the previous year as shown below: | Activity Cost Pool | Total Activity | Total Cost | |------------------------------------------|-------------------------|---------------| | Customer deliveries (Number of deliveries) | 4,000 deliveries | $328,000 | | Customer telephone orders (Number of manual orders) | 8,000 orders | $624,000 | | Line-item picking (Number of line items picked) | 1,032,000 line items | $640,000 | | Other organization-sustaining costs (None) | - | $1,296,000 | | **Total selling and administrative expenses** | - | **$2,888,000** | 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 $32,000 to buy from its manufacturers): | Activity Measure | University | Memorial | |-----------------------------------------|------------|----------| | Number of deliveries | 13 | 4 | | Number of telephone orders | 10 | 16 | | Number of line items picked | 200 | 300 | **Required** 1. Calculate the total revenue that Worley would receive from University and Memorial. 2. Compute the activity rate for each activity cost pool.
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