Schneider Electric manufactures power distribution equipment for commercial customers, such as hospitals and manufacturers. Activity-based costing was used to determine customer profitability. Customer service activities were assigned to individual customers, using the following assumed customer service activities, activity base, and activity rate:

Assume that the company had the following gross profit information for three representative customers:

The administrative records indicated that the activity-base usage quantities for each customer were as follows:

a. Prepare a customer profitability report dated for the year ended December 31, 2010, showing (1) the income from operations after customer service activities, (2) the gross profit as a percent of sales, and (3) the income from operations after customer service activities as a percent of sales. Prepare the report with a column for each customer. Round percentages to the nearest whole percent.
b. Interpret the report in part(a).

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Customer Service Activity Activity Base Activity Rate Bid preparation Shipment Support standard items Support nonstandard items Number of bid requests Number of shipments Number of standard items ordered Number of nonstandard items ordered $220/request $18/shipment $24/std. item $82/nonstd. item Customer 2 $18,000 9,360 $ 8,640 Customer 3 Revenue Cost of goods sold Gross profit Gross profit as a percent of sales Customer 1 $24,250 11,640 $12,610 $40,000 24,800 $15,200 62% 48% 38% Activity Base Customer 1 Customer 2 Customer 3 Number of bid requests Number of shipments Number of standard items ordered Number of nonstandard items ordered 20 34 48 50 16 52 15 35 25