PR 4-5B Allocating Selling and Administrative Expenses Using Activity- Based Costing Obj. 5 Shrute Inc manufactures office coplers, which are sold to retailers. The price and cost of goods sold for each copier are as follows: Price Cost of goods sold Gross profit $1,110 per unit 1687 $ 428 per unit In addition, the company incurs selling and administrative expenses of $414,030. The company wishes to assign these costs to its three major retail customers. The Warehouse, Kosmo Co, and Supply Universe. These expenses are related to its three major nonmanufacturing activities: customer service, sales order processing and advertising support. The advertising support is in the form of advertisements that are placed by Shrute Inc. to support the retailer's sale of Shrute coplers to consumers. The budgeted activity costs and activity bases associated with these activities are: Activity Customer service Sales order processing Advertising support Total activity cost Budgeted Activity Cost 5 76,560 25,920 311,250 5414030 Activity Base Number of service requests Number of sales orders Number of ads placed Activity-base usage and unit volume information for the three customers is as follows: Kosmo Co. Total Number of service requests Number of sales orders Number of ads placed Unit volume The Warehouse 62 300 25 810 340 640 180 810 Supply Universe 25 140 44 810 427 1,080 249 2,430 Instructions 1. Determine the activity rates for each of the three rionmanufacturing activities. 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 A Provide recommendations to management, based on the profitability reports in (3)