Financial and Managerial Accounting: PR26-5A Cold Zone Mechancial Inc. manufactures cooling units

Financial and Managerial AccountingPR26-5A Allocating Selling and Administrative Expenses using Activity-Based Costing 
Cold Zone Mechancial Inc. manufactures cooling units for commercial buildings. The price and cost of goods sold for each unit are as follows: 
Price per unit 63,500 per unit 
Cost of goods sold 36,000 
Gross profit per unit 27,500 per unit 

In addition, the company incurs selling and administrative expenses of $240,940. The company wishes to assign these costs to its three major customers, Good Knowledge University, Hot Shotz Arena, and Break-a-Leg Hospital. 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 Budgeted Activity Cost Activity Base 
Customer service 85,800 Number of service requests 
Project bidding 63,640 Number of bids 
Engineering support 91,500 Number of customer design changes 
Total costs $240,940 

Activity-base usage and unit volume information for the three customers is as follows:
Good Knowledge University Hot Shotz Arena Break-a-Leg Hospital Total
Number of service requests 50 44 170 264 
Number of bids 31 15 40 86 
Number of customer design changes 38 25 120 183 
Unit volume 19 12 5 36 

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 income from operations associated with each customer. Refer to the lists of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. Be sure to complete the statement heading. “Less”, “Plus” or colons (:) will automatically appear if required. Enter all amounts as positive numbers, except for a negative income from operations.
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