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Cooler Master Inc. manufactures cooling units for commercial buildings. The price and cost of goods sold for each unit are as follows: In addition, the
Cooler Master Inc. manufactures cooling units for commercial buildings. The price and cost of goods sold
for each unit are as follows:
In addition, the company incurs selling and administrative expenses of $ The company wishes to
assign these costs to its three major customers, Gough Industries, Breen Inc., and The Martin Group.
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:
Activitybase usage and unit volume information for the three customers is as follows:
Provide a table for parts a and
a Determine the activity rates for each of the three nonmanufacturing activity pools.
b Determine the activity costs allocated to the three customers, using the activity rates in a
c Construct customer profitability reports for the three customers, dated for the year ended
December using the activity costs in b The reports should disclose the gross profit and
income from operations associated with each customer.
d Provide recommendations to management on how operations can be improved based on the
profitability reports in c
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