Allocating Selling and Administrative Expenses using Activity-Based Costing Shrute Inc. manufactures office coplers, which are sold to retailers. The price and cost of goods sold for each copler are as follows: Price $690 per unit 410 Cost of goods sold Gross profit $280 per unit In addition, the company incurs selling and administrative expenses of $232,110. The company wishes to assign these costs to its three major retail customers, The Warehouse, Kosmo Co., and Supply Universe. These expenses are related to its three major nonmanufacturing activities: customer service, sales order processing, and advertising support. The advertising support is in the form of advertisements that are placed by Shrute Inc. to support the retailer's sale of Shrute coplers to consumers. The budgeted activity costs and activity bases associated with these activities are: Activity Budgeted Activity Cost Activity Base Number of service requests Customer service Sales order processing Advertising support $46,080 24,030 162,000 Number of sales orders Number of ads placed Total activity cost $232.110 Supply Universe Total Activity-base usage and unit volume information for the three customers is as follows: The Warehouse Kosmo Co. Number of service requests 70 110 Number of sales orders 240 320 530 890 120 2,010 Number of ads placed Unit volume 670 670 Required: 1. Determine the activity rates for each of the three non manufacturing activities. Round to the nearest whole dollar Activity Rate Customer Service per serv. reg. Sales Order Processings per bid Advertising Support per customer design change 2. Determine the activity costs allocated to the three customers, using the activity rates in (1) Activity Costs The Warehouse Kosmo Co Supply Universe 3. Construct customer profitability reports for the three customers, dated for the year ended December 31, 2016, using the activity costs in (2). The reports should disclose the gross profit and income from operations associated with each customer. Enter all amounts as positive numbers, except for a negative income from operations Shrute Inc Customer Profitability Report For the Year Ended December 31 The Warehouse Kosmo Co Supply Universe Revenues Cost of goods sold Grous profit Selling and administrative activities: Customer service Sales order processing 3. Construct customer profitability reports for the three customers, dated for the year ended December 31, 2016, using the activity costs in (2). The reports should disclose the gross profit and income from operations associated with each customer. Enter all amounts as positive numbers, except for a negative income from operations Shrute Inc. Customer Profitability Report For the Year Ended December 31 The Warehouse Kosmo Co Supply Universe Revenues Cost of goods sold Gross profit Selling and administrative activities: Customer service Sales order processing Advertising support Total selling and administrative activities Income (loss) from operations
