Metroid 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, 20Y8, showing (1) the operating income after customer service activities, (2) the gross profit as a percent of sales, and (3) the operating income 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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Activity Base Number of bid requests Number of shipments Number of standard items ordered Number of nonstandard items ordered Customer Service Activity Activity Rate $420 per request $90 per shipment $30 per std. item $180 per nonstd. item Bid preparation Shipment Support standard items Support nonstandard items Customer 1 Customer 2 Customer 3 Revenue Cost of goods sold Gross profit Gross profit as a percent of sales $130,000 (81,900) $ 48,100 $ 210,000 (113,400) $ 96,600 $180,000 (90,000) $ 90,000 37% 46% 50%