Activity-Based Costing and Customer Profitability Metrold Electric manufactures power distribution equipment for commercial customers, such as hospitals and manufacturers. Activity-based costing was used to determ customer profitability. Customer service activities were assigned to individual customers, using the following assumed customer service activities, activity base, and activity rate: Activity Rate Customer Service Activity Bid preparation Shipment Support standard items Support nonstandard items Activity Base Number of bid requests Number of shipments Number of standard Items ordered Number of nonstandard items ordered $420 per request $90 per shipment $30 per std. Item $180 per nonstd. item Assume that the company had the following gross profit information for three representative customers: Customer 2 Customer Customer 1 $130.000 Revenues Cost of goods sold Gross profit $180,000 (90,000) $210,000 (113,400) $96,600 (81,900) $48,100 $90,000 379 46% 50% Gross profit as a percent of sales The administrative records indicated that the activity base usage quantities for each customer were as follows: Activity Base Customer 1 Customer 2 Customer 3 15 40 60 25 55 50 Number of bid requests Number of shipments Number of standard items ordered Number of nonstandard items ordered 20 35 52 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 activitie profit as a percent of sales, and (3) the operating income after customer service activities as a perdent of sales. Prepare the report with a column for each Round percentages to the nearest whole percent. Metroid Electric Customer Profitability Report For the Year Ended December 31, 2018 Customer 1 Customer 2 Customer Revenues Cost of goods sold Gross profit Customer service activities: Bid preparation Shipment Support standard items Support nonstandard items Previous Total customer service activities Operating income after customer service activities Gross profit as a percent of sales Operating income after customer service activities as a percent of sales 90 b. Interpret the report in part (a). The gross profit as a percent of sales indicated that was the least profitable, while was the most probleer deduct the activity costs associated with customer service activities, became the least profitable, while became early as profitable as Customer 2. The reason is because consumed much more customer service activities than did the other customers. Aparty, ordered nonstandard products that required specialized id requests. In addition required more shipment indicating smaller shipments to a customer's location, rather than a few largeshments