Med Max gathered the data below for two of the many hospitals that it serves—City General and County General (each hospital purchased medical supplies that had cost Med Max $32,000 to buy from its manufacturers):
1) Compute the total revenue that Med Max would receive from City General and County General.

(Mad Max cost X percent given) + Mad Max Cost
*Look for the Percent in the beginning of the problem
($32,000 X .10) + $32,000
= 3200 + $32,000
= $35200
*Answer is the same for City General and County General

2) Compute the activity rate for each activity cost pool. *Use the first Chart “Activity Cost Pool Activity Rate = Total Cost / Total Activity
Customer deliveries
$534,000 / 6,000 = 89 per delivery
Manual order processing
$380,000 / 5,000 = 76 per manual order
Electronic order processing
$228,000 / 12,000 = 19 per electronic order
Line item picking
$1,104,500 / 470,000 = 2.35 per line item picked

*Use answers from part 2 and multiply them with Activity Table.
3) Compute the total activity costs that would be assigned to City General and County General.
Total Activity Costs:

(Number of deliveries X Customer deliveries) + (Number of manual orders X Manual orders)…………………………………………

City General
(18 X $89) + (0 X $76) + (13 X $19) + (190 X 2.35 ) = 2295.5
County General
(21 X $89) + (49 X $76) + (0 X $19) + (250 X 2.35) = 6180.5

4) Compute Med Max’s customer margin for City General and County General. (Hint: Do not overlook the $32,000 cost of goods sold that Med Max incurred serving each hospital.)

*For customer margin use Revenue – (COGS + Total activity)

City General
$35,200 – ($32,000 + $2,295.5) = $904.5

County General
$35,200 – ($32,000 + $6,180.5) =