1. 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	$670	per unit
   Cost of goods sold	400
   Gross profit	$270	per unit

   In addition, the company incurs selling and administrative expenses of $290,680. 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			$29,400		Number of service requests
   Sales order processing			21,580		Number of sales orders
   Advertising support			239,700		Number of ads placed
   	Total activity cost		$290,680

   Activity-base usage and unit volume information for the three customers is as follows:

   	The Warehouse			Kosmo Co.		Supply Universe		Total
   Number of service requests	40			10		160		210
   Number of sales orders	230			100		500		830
   Number of ads placed	20			20		130		170
   Unit volume	640			640		640		1,920

   Required:

   1. Determine the 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 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
   Gross profit	$	$	$
   Selling and administrative activities:
   Customer service	$	$	$
   Sales order processing
   Advertising support
   Total selling and administrative activities	$
   Income (loss) from operations	$	$	$