Allocating selling and administrative expenses using activity-based costing Arctic Air Inc. manufactures cooling units for commercial buildings. The price and cost of goods sold for each unit are as follows: Price $60,000 per unit (28,000) Cost of goods sold Gross profit $32,000 per unit In addition, the company incurs selling and administrative expenses of $226,250. The company wishes to assign these costs to its three major customers, Gough Industries, Breen Inc., and The Martin Group. 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 Customer service Project bidding Engineering support Total activity cost Budgeted Activity Cost Activity Base $31,500 Number of service requests 74,000 Number of bids 120,750 $226,250 Number of customer design changes Activity-base usage and unit volume information for the three customers is as follows: Gough Industries Breen The Martin Inc. Group Total Number of service requests 36 28 116 180 Number of bids 50 40 95 185 Number of customer design changes 18 35 108 161 Unit volume 30 16 4 50