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$1,110per unit Cost of goods sold 682 Gross profit$428per unit In addition, the company incurs selling and administrative expenses of $414,030. 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 A measure of activity that is related to changes in cost. Used in analyzing and classifying cost behavior.activity bases associated with these activities are:

ActivityBudgeted Activity CostActivity BaseCustomer service$76,860Number of service requestsSales order processing25,920Number of sales ordersAdvertising support311,250Number of ads placedTotal activity cost$414,030Activity-base usage and unit volume information for the three customers is as follows:

The WarehouseKosmo Co.Supply UniverseTotalNumber of service requests6234025427Number of sales orders3006401401,080Number of ads placed2518044249Unit volume8108108102,430Required:

1.Determine the The cost of an activity per unit of activity base.activity rates for each of the three nonmanufacturing activities. Round to the nearest whole dollar.

Activity Rate

Customer Service____per serv. req.

Sales Order Processing ____per sls. order

Advertising Support ___per ad

2.Determine the activity costs allocated to the three customers, using the activity rates in (1).

Activity Costs

The Warehouse Kosmo Co. Supply Universe