ACC buys medical supplies from a variety of manufacturers and resells it to othe

Question

ACC buys medical supplies from a variety of manufacturers and resells it to other health care centers. However, ACC is facing a decline in profits. The manager decided to use an activity-based costing system to improve his understanding of the costs incurred based on the activity flow. The company listed the selling and administrative expenses in four activities as follows: Allocation Base Activity Customer deliveries Manual order processing. Electronic order processing Line item picking The total cost of activity amounted to $690,000. Total Cost of Activity $150,000 $120,000 $ 80,000 $360,000 Total Activity 1,800 deliveries 1,200 orders 1,400 orders 3,600 line items picked Number of deliveries Number of manual orders Number of electronic orders Number of line items picked The manager also collected the data below for two of the health care centers that ACC pro- vides supplies to: Sunway Medical Center and KPJ. Sunway Activity Customer deliveries Manual order processing Electronic order processing Line item picking Medical Center KPJ 30 10 18 100 2 26 90 Requirements 1. Compute the activity allocation rate for each activity cost pool. 2. Compute the total activity costs that would be assigned to KPJ

Explanation / Answer

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Total Cost of Activity Total Activity Activity Allocation Rate Customer deliveries 150000 1800                                       83.33 Manual order processing 120000 1200                                    100.00 Electronic order processing 80000 1400                                       57.14 Line item Picking 360000 3600                                    100.00

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