Financial and Managerial Accounting: PR26-5B Shrute Inc. manufactures office copiers

Financial and Managerial Accounting 
PR26-5B Allocating Selling and Administrative Expenses using Activity-Based Costing 
Shrute Inc. manufactures office copiers, which are sold to retailers. The price and cost of goods sold for each copier are as follows: 
Price 1,110 per unit 
Cost of goods sold 682 
Gross profit $428 

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 copiers to consumers. The budgeted activity costs and activity bases associated with these activities are: 
Activity Budgeted Activity Cost Activity Base 
Customer service 76,860 Number of service requests 
Sales order processing 25,920 Number of sales orders 
Advertising support 311,250 Number of ads placed 
Total activity cost $414,030 

Activity-base usage and unit volume information for the three customers is as follows: 
The Warehouse Kosmo Co. Supply Universe Total
Number of service requests 62 340 25 427 
Number of sales orders 300 640 140 1,080 
Number of ads placed 25 180 44 249 
Unit volume 810 810 810 2,430 

Instructions: 
1. Determine the activity rates for each of the three nonmanufacturing activities. Round to the nearest whole dollar. 
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, 2014, using the activity costs in (2). The reports should disclose the gross profit and income from operations associated with each customer. Enter all amounts as positive numbers.
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