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	$660	per unit
Cost of goods sold	400
Gross profit	$260	per unit

In addition, the company incurs selling and administrative expenses of $273,600. 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			$35,880		Number of service requests
Sales order processing			29,120		Number of sales orders
Advertising support			208,600		Number of ads placed
	Total activity cost		$273,600

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	50			10		200		260
Number of sales orders	250			110		550		910
Number of ads placed	20			10		110		140
Unit volume	580			580		580		1,740

Required:

1. Determine the activity rates for each of the three nonmanufacturing activities. Round to the nearest whole dollar.

	Activity Rate
Customer Service	$fill in the blank bfa64df5906802d_1	per serv. req.
Sales Order Processing	$fill in the blank bfa64df5906802d_2	per bid
Advertising Support	$fill in the blank bfa64df5906802d_3	per customer design change

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

Activity Costs
The Warehouse	$fill in the blank bfa64df5906802d_4
Kosmo Co.	$fill in the blank bfa64df5906802d_5
Supply Universe	$fill in the blank bfa64df5906802d_6

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	$fill in the blank 63407dff406a022_1	$fill in the blank 63407dff406a022_2	$fill in the blank 63407dff406a022_3
Cost of goods sold	fill in the blank 63407dff406a022_4	fill in the blank 63407dff406a022_5	fill in the blank 63407dff406a022_6
Gross profit	$fill in the blank 63407dff406a022_7	$fill in the blank 63407dff406a022_8	$fill in the blank 63407dff406a022_9
Selling and administrative activities:
Customer service	$fill in the blank 63407dff406a022_10	$fill in the blank 63407dff406a022_11	$fill in the blank 63407dff406a022_12
Sales order processing	fill in the blank 63407dff406a022_13	fill in the blank 63407dff406a022_14	fill in the blank 63407dff406a022_15
Advertising support	fill in the blank 63407dff406a022_16	fill in the blank 63407dff406a022_17	fill in the blank 63407dff406a022_18
Total selling and administrative activities	$fill in the blank 63407dff406a022_19	fill in the blank 63407dff406a022_20	fill in the blank 63407dff406a022_21
Income (loss) from operations	$fill in the blank 63407dff406a022_22	$fill in the blank 63407dff406a022_23	$fill in the blank 63407dff406a022_24