Naper Inc. manufactures power equipment. Naper has two primary productsgenerators and air compressors. The following report was prepared by the controller for Napers senior marketing management for the year ended December 31:

1		Generators	Air Compressors	Total
2	Revenue	$2,037,000.00	$1,300,000.00	$3,337,000.00
3	Cost of goods sold	1,466,640.00	936,000.00	2,402,640.00
4	Gross profit	$570,360.00	$364,000.00	$934,360.00
5	Selling and administrative expenses			380,578.00
6	Income from operations			$553,782.00

The marketing management team was concerned that the selling and administrative expenses were not traced to the products. Marketing management believed that some products consumed larger amounts of selling and administrative expense than did other products. To verify this, the controller was asked to prepare a complete product profitability report, using activity-based costing.

The controller determined that selling and administrative expenses consisted of two activities: sales order processing and post-sale customer service. The controller was able to determine the activity base and activity rate for each activity, as follows:

Activity	Activity Base	Activity Rate
Sales order processing	Sales orders	$ 83 per sales order
Post-sale customer service	Service requests	$339 per customer service request

The controller determined the following activity-base usage information about each product:

	Generators	Air Compressors
Number of sales orders	952	1,150
Number of service requests	156	452

b. Construct product profitability reports for the three products, dated for the year ended December 31, using the activity costs in (a). The reports should disclose the gross profit and income from operations associated with each products. Refer to the Labels and Amount Descriptions for exact wording of text entries. Be sure to complete the statement heading. Enter all amounts as positive numbers, except for a negative income from operations. Round percentages to the one decimal place. Colons will appear automatically.

Score: 47/135

Naper Inc.

Product Profitability Report

1		Generators	Air Compressors	Total
2	Revenues	2037000	1300000	3337000
3	Cost of goods sold	1466640	936000	2402640
4
5	Selling and administrative expenses
6
7
8
9	Post-sale customer service
10	Gross profit as a percentage of sales
11	Income from operations as a percentage of sales