Western Mechancial Inc. manufactures cooling units for commercial buildings. The price and cost of goods sold for

Question:

Western Mechancial Inc. manufactures cooling units for commercial buildings. The price and cost of goods sold for each unit are as follows:
Price...........................................$55,200 per unit
Cost of goods sold.....................27,500
______
Gross profit..............................$27,700 per unit
______
In addition, the company incurs selling and administrative expenses of $199,800. The company wishes to assign these costs to its three major customers, Coastal Atlantic University, Celebrity Arena, and Hope Hospital. These expenses are related to three major nonmanufacturing activities: customer service, project bidding, and engineering support. The engineering support is in the form of engineering changes that are placed by the customer to change the design of a product. The budgeted activity costs and activity bases associated with these activities are:

Activity Base Budgeted Activity Cost Activity Customer service Project bidding Engineering support Total costs Number of

Activity-base usage and unit volume information for the three customers is as follows:

Coastal Atlantic Celebrity University Нope Hospital Total Arena Number of service requests Number of bids Number of cus

1. Determine the activity rates for each of the three non-manufacturing activity pools.
2. Determine the activity costs allocated to the three customers, using the activity rates in (1).

3. Construct customer profitability reports for the three customers, dated for the year ended December 31, 2013, using the activity costs in (2). The reports should disclose the gross profit and income from operations associated with each customer.
4. Provide recommendations to management, based on the profitability reports in (3).