Activity-Based Costing and Customer Profitability

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:

Customer Service Activity	Activity Base	Activity Rate
Bid preparation	Number of bid requests	$420 per request
Shipment	Number of shipments	$90 per shipment
Support standard items	Number of standard items ordered	$30 per std. item
Support nonstandard items	Number of nonstandard items ordered	$180 per nonstd. item

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

	Customer 1			Customer 2			Customer 3
Revenues		$130,000			$210,000			$180,000
Cost of goods sold		(81,900)			(113,400)			(90,000)
Gross profit		$48,100			$96,600			$90,000
Gross profit as a percent of sales		37%			46%			50%

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

Activity Base	Customer 1	Customer 2	Customer 3
Number of bid requests	15	40	60
Number of shipments	25	55	50
Number of standard items ordered	20	35	52
Number of nonstandard items ordered	6	65	85

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.

Metroid Electric
Customer Profitability Report
For the Year Ended December 31, 20Y8
	Customer 1	Customer 2	Customer 3
Revenues	$fill in the blank 9f8226f0f03dfb6_1	$fill in the blank 9f8226f0f03dfb6_2	$fill in the blank 9f8226f0f03dfb6_3
Cost of goods sold	fill in the blank 9f8226f0f03dfb6_4	fill in the blank 9f8226f0f03dfb6_5	fill in the blank 9f8226f0f03dfb6_6
Gross profit	$fill in the blank 9f8226f0f03dfb6_7	$fill in the blank 9f8226f0f03dfb6_8	$fill in the blank 9f8226f0f03dfb6_9
Customer service activities:
Bid preparation	$fill in the blank 9f8226f0f03dfb6_10	$fill in the blank 9f8226f0f03dfb6_11	$fill in the blank 9f8226f0f03dfb6_12
Shipment	fill in the blank 9f8226f0f03dfb6_13	fill in the blank 9f8226f0f03dfb6_14	fill in the blank 9f8226f0f03dfb6_15
Support standard items	fill in the blank 9f8226f0f03dfb6_16	fill in the blank 9f8226f0f03dfb6_17	fill in the blank 9f8226f0f03dfb6_18
Support nonstandard items	fill in the blank 9f8226f0f03dfb6_19	fill in the blank 9f8226f0f03dfb6_20	fill in the blank 9f8226f0f03dfb6_21
Total customer service activities	$fill in the blank 9f8226f0f03dfb6_22	$fill in the blank 9f8226f0f03dfb6_23	$fill in the blank 9f8226f0f03dfb6_24
Operating income after customer service activities	$fill in the blank 9f8226f0f03dfb6_25	$fill in the blank 9f8226f0f03dfb6_26	$fill in the blank 9f8226f0f03dfb6_27
Gross profit as a percent of sales	fill in the blank 9f8226f0f03dfb6_28%	fill in the blank 9f8226f0f03dfb6_29%	fill in the blank 9f8226f0f03dfb6_30%
Operating income after customer service activities as a percent of sales	fill in the blank 9f8226f0f03dfb6_31%	fill in the blank 9f8226f0f03dfb6_32%	fill in the blank 9f8226f0f03dfb6_33%