Emery Company sells small machine parts to heavy equipment manufacturers for an average price of $$1\mathrm{.}30$ per part. There are two types of customers: those who place small, frequent orders and those who place larger, less frequent orders. Each time an order is placed and processed, a setup is required. Scheduling is also needed to coordinate the many different orders that come in and place demands on the plant$$s manufacturing resources. Emery also inspects a sample of the products each time a batch is produced to ensure that the customer$$s specifications have been met. Inspection takes essentially the same time regardless of the type of part being produced. Emery$$s Cost Accounting Department has provided the following budgeted data for customer$-$related activities and costs $($the amounts expected for the coming year$)$:

Frequently Ordering

Customers

Less Frequently

Ordering Customers

Sales orders $30,0003,000$

Average order size $3,00030,000$

Number of setups $35,2505,250$

Scheduling hours $45,7505,250$

Inspections $35,2505,250$

Average unit cost$*$ $$0\mathrm{.}7$ $$0\mathrm{.}7$

$*$This cost does not include the cost of the following "customer$-$related" activites:

Customer$-$related activity costs:

Processing sales orders $$2,970,000$

Scheduling production $1,377,000$

Setting up equipment $4,374,000$

Inspecting batches $5,832,000$

Total $$14,553,000$

Required:

$1.$ Assign the customer$-$related activity costs to each category of customers in proportion to the sales revenue earned by each customer type.

Sales revenue $

Customer$-$related activity costs $

Calculate the profitability of each customer type. $($Because sales revenues for each customer type are equal, the profitability will be the same for each customer type.$)$

$

$2.$ Assign the customer$-$related activity costs to each customer type using activity rates. Enter the appropriate activity rates below.

Processing sales orders $ per order

Scheduling production $ Per scheduling hour

Setting up equipment $ per setup

Inspecting batches $ per inspection

Calculate the profitability of each customer category.

Customer Profitability

Frequent $

Infrequent $