In the Activity$-$Based Costing and the Evaluation of Customer Profitability: A Case Study: $6.$Calculate driver rates, and allocate the operating expenses to customers Sales $3,114,1602,223,1481,638,1401,300,0751,134,998$

COGS $1,779,5201,270,370936,080742,900648,570$

Gross Margin $1,334,640952,778702,060557,175486,428$

Operating expenses $1,276,806844,796556,968390,023317,799$

Operating Income $57,834107,982145,092167,152168,629$

Exhibit $2$

Administrative Wages $$368,000$

Advertising $71,852$

Building Depreciation $48,600$

Maintenance $38,718$

Office Equipment Depreciation $8,400$

Promotional Materials $58,000$

Sales Staff Commissions and Wages $361,416$

Shipping $42,893$

Taxes and Insurance $15,283$

Travel $92,788$

Utilities and Fuel $6,491$

Warehouse Wages $152,817$

Other $11,548$

Total $$1,276,806$

Carolina Creations' First$-$Stage Allocation Percentages

Making Sales Calls Negotiating Contracts Processing Orders Warehousing Activities New Customer Development Shipping Post$-$Sale Customer Service Other Total

Administration Wages $5\%5\%30\%5\%10\%10\%15\%20\%100\%$

Advertising $20\%20\%60\%100\%$

Building Depreciation $75\%25\%100\%$

Maintenance $65\%35\%100\%$

Office Equipment Depreciation $5\%5\%40\%20\%5\%25\%100\%$

Promotional Materials $50\%5\%35\%10\%100\%$

Salesperson Commissions and Wages $65\%10\%15\%5\%5\%100\%$

Shipping $100\%100\%$

Taxes and Insurance $55\%35\%10\%100\%$

Travel $50\%5\%40\%5\%100\%$

Utilities and Fuel $25\%20\%10\%5\%40\%100\%$

Warehouse Wages $15\%80\%5\%100\%$

Other $100\%100\%$

Carolina Creations' Cost Drivers and Quantities

Activity Cost Driver Driver Quantity

Making Sales Calls # of sales calls $215$

Negotiating Contracts # of hours of negotiation $200$

Processing Orders # of orders $600$

Warehousing Activities Cost of goods sold $$1,779,520$

New Customer Development # of new customers $$17$

Shipping Pounds shipped $\backslash$times Distance in miles $87,000,000$

Post$-$Sale Customer Support # of support hours $1,800$

Other Amount of sales dollars $3,114,160$

Note: New customer development is a $0,1$ variable. The quantity for a specific customer will be $1$ if the customer is a new customer

$($it will be charged the new customer development rate$)$ and $0$ if it is not a new customer $($it will not be charged the new customer development rate$).$

All monetary values are represented in U$.$S$.$ dollars.

Example of customer activities

Southwest Furniture Indianapolis Interiors San Diego Interiors

Sales $437,500131,25087,500$

COGS $250,00075,00050,000$

Gross Margin $187,50056,25037,500$

Making Sales Calls $14188$

Negotiating Contracts $41310$

Processing Orders $19623$

Warehousing Activities $250,00075,00050,000$

New Customer Development $--1$

Shipping $1,877,0004,862,0004,692,000$

Post$-$Sale Customer Support $72931$

Other $437,500131,25087,500$

Total Operating Expenses