Allocating Selling and Administrative Expenses using Activity-Based Costing Shrute Inc. manufactures office copiers, which are sold to retailers. The price and cost of goods sold for each copier are as follows: Price Cost of goods sold Gross profit $720 per unit (430) $290 per unit In addition, the company incurs selling and administrative expenses of $236,150. 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 copiers to consumers. The budgeted activity costs and activity bases associated with these activities are: Activity Budgeted Activity Cost Activity Base Customer service Sales order processing Advertising support Total activity cost $49,500 Number of service requests 31,850 Number of sales orders 154,800 Number of ads placed $236,150 Activity-base usage and unit volume information for the three customers is as follows: Number of service requests Number of sales orders Number of ads placed Unit volume Required: The Warehouse Kosmo Co. Supply Universe Total 70 10 250 330 250 110 550 910 20 10 90 120 620 620 620 1,860 1. Determine the activity rates for each of the three nonmanufacturing activities. Round to the nearest whole dollar. Activity Rate Customer Service $ Sales Order Processing Advertising Support per serv. req. per sls. order per ad 2. Determine the activity costs allocated to the three customers, using the activity rates in (1). The Warehouse Kosmo Co. Supply Universe Activity Costs $ 3. Construct customer profitability reports for the three customers, dated for the year ended December 31, using the activity costs in (2). The reports should disclose the gross profit and operating income associated with each customer. Revenues Shrute Inc. Customer Profitability Report For the Year Ended December 31 The Warehouse Kosmo Co. Supply Universe $ Cost of goods sold Gross profit Selling and administrative activities: Customer service 2. Determine the activity costs allocated to the three customers, using the activity rates in (1). The Warehouse Kosmo Co. Supply Universe Activity Costs $ 3. Construct customer profitability reports for the three customers, dated for the year ended December 31, using the activity costs in (2). The reports should disclose the gross profit and operating income associated with each customer. 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 Operating income