PR 18-5A Allocating Selling and Administrative Expenses Using Activity-Based Costing Obj. 3 Arctic Air Inc munufactures cooling units for commercial buildings. The price and cost of yoods sold for each unit lire as follows: Price Cost of goods sold Gross profit $ 60,000 per unit (28,000 $ 32,000 per unit In addition, the company incurs selling and administrative expenses of $226,250. The company wishes to assign these costs to its three major customers. Gough Industries, Breen Ine, 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: Activity Customer service Project bidding Engineering support Total costs Budgeted Activity Cost $ 31,500 74,000 120.750 $226,250 Activity Base Number of service requests Number of bids Number of customer design changes Activities Amos 2 3 4 5 6 7 8 W E R T S D F G H J K L X CVBNM Ivy & AA A Activity-base usage and unit volume information for the three customers is as follows: Gough Industries Broon Inc. Total The Martin Group Number of service requests Number of bids Number of customer design changes Unit volume 36 50 18 28 40 35 115 95 108 180 185 161 30 16 4 50 Instructions 1. Determine the activity rates for each of the three nonmanufacturing activity pools. 2. Determine the activity costs allocated to the three customers, using the activity rates in (1) 3. Construct customer profitability reports for the three customers, dated for the year ended December 31, using the activity costs in (2). The reports should disclose the gross profit and operating income associated with each customer AS - Provide recommendations to management, based on the profitability reports in (3) PR 18-6A Product Costing and Decision Analysis for a Service Company Obj. 6 Pleasant Stay Medical Inc wishes to determine its product costs. Pleasant Stay offers a variety of % 5 3 4 6 7 8 9 W E R T Y U S D F G H J K L