Allocating Selling and Administrative Expenses using Activity-Based Costing Western Mechanical Inc. manufactures cooling units for commercial buildings. The price and cost of goods sold for each unit are as follows: Price $710 per unit Cost of goods sold 430 Gross profit $280 per unit In addition, the company incurs selling and administrative expenses of $293,880. The company wishes to assign these costs to its three major customers, Coastal Atlantic University, Celebrity Arena, and Hope Hospital. These expenses are related to three major nonmanufacturing activities: customer service, project bidding, and engineering support. The engineering support is in the form of engineering changes that are placed by the customer to change the design of a product. The budgeted activity costs and activity bases associated with these activities are: Activity Budgeted Activity Cost Activity Base Customer service $34,040 Number of service requests Project bidding 21,840 Number of bids Engineering support 238,000 Number of customer design changes Total costs $293,880 Activity-base usage and unit volume information for the three customers is as follows: Coastal Atlantic University Celebrity Arena Hope Hospital Total Number of service requests 50 10 170 230 Number of bids 240 100 500 840 Number of customer design changes 20 20 130 170 Unit volume 560 560 560 1,680 Required: 1. Determine the activity rates for each of the three nonmanufacturing activity pools. Round to the nearest whole dollar. Activity Rate Customer Service $ per serv. req. Project bidding $ per bid Engineering Support $ per customer design change 2. Determine the activity costs allocated to the three customers, using the activity rates in (1). Activity Costs Coastal Atlantic University $ Celebrity Arena $ Hope Hospital $ Hide 3. Construct customer profitability reports for the three customers, dated for the year ended December 31, 2014, 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. Western Mechanical Inc. Customer Profitability Report For the Year Ended December 31, 2014 Coastal Atlantic University Celebrity Arena Hope Hospital Revenues $ $ $ Less cost of goods sold Gross profit $ $ $ Less selling and administrative activities: Customer service $ $ $ Project bidding Engineering support $ $ $ Income (loss) from operations $ $ $