llocating 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 $710 per unit Cost of goods sold (430) Gross profit $280 per unit In addition, the company incurs selling and administrative expenses of $219,700. 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 $44,100 Number of service requests Sales order processing 21,600 Number of sales orders Advertising support 154,000 Number of ads placed Total activity cost $219,700 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 60 10 230 300 Number of sales orders 220 100 480 800 Number of ads placed 20 10 80 110 Unit volume 680 680 680 2,040 Required: 1. Determine the activity rates for each of the three nonmanufacturing activities. Round to the nearest whole dollar. Activity Rate Customer Service $fill in the blank d1108ef8803df8d_1 per serv. req. Sales Order Processing $fill in the blank d1108ef8803df8d_2 per sls. order Advertising Support $fill in the blank d1108ef8803df8d_3 per ad 2. Determine the activity costs allocated to the three customers, using the activity rates in (1). Activity Costs The Warehouse $fill in the blank d1108ef8803df8d_4 Kosmo Co. $fill in the blank d1108ef8803df8d_5 Supply Universe $fill in the blank d1108ef8803df8d_6 Feedback 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. Shrute Inc.Customer Profitability ReportFor the Year Ended December 31 The Warehouse Kosmo Co. Supply Universe Revenues $fill in the blank 6a46a1f4003101e_1 $fill in the blank 6a46a1f4003101e_2 $fill in the blank 6a46a1f4003101e_3 Cost of goods sold fill in the blank 6a46a1f4003101e_4 fill in the blank 6a46a1f4003101e_5 fill in the blank 6a46a1f4003101e_6 Gross profit $fill in the blank 6a46a1f4003101e_7 $fill in the blank 6a46a1f4003101e_8 $fill in the blank 6a46a1f4003101e_9 Selling and administrative activities: Customer service $fill in the blank 6a46a1f4003101e_10 $fill in the blank 6a46a1f4003101e_11 $fill in the blank 6a46a1f4003101e_12 Sales order processing fill in the blank 6a46a1f4003101e_13 fill in the blank 6a46a1f4003101e_14 fill in the blank 6a46a1f4003101e_15 Advertising support fill in the blank 6a46a1f4003101e_16 fill in the blank 6a46a1f4003101e_17 fill in the blank 6a46a1f4003101e_18 Total selling and administrative activities $fill in the blank 6a46a1f4003101e_19 fill in the blank 6a46a1f4003101e_20 fill in the blank 6a46a1f4003101e_21 Operating income $fill in the blank 6a46a1f4003101e_22 $fill in the blank 6a46a1f4003101e_23 $fill in the blank 6a46a1f4003101e_24

llocating 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 $710 per unit Cost of goods sold (430) Gross profit $280 per unit In addition, the company incurs selling and administrative expenses of $219,700. 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 $44,100 Number of service requests Sales order processing 21,600 Number of sales orders Advertising support 154,000 Number of ads placed Total activity cost $219,700 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 60 10 230 300 Number of sales orders 220 100 480 800 Number of ads placed 20 10 80 110 Unit volume 680 680 680 2,040 Required: 1. Determine the activity rates for each of the three nonmanufacturing activities. Round to the nearest whole dollar. Activity Rate Customer Service $fill in the blank d1108ef8803df8d_1 per serv. req. Sales Order Processing $fill in the blank d1108ef8803df8d_2 per sls. order Advertising Support $fill in the blank d1108ef8803df8d_3 per ad 2. Determine the activity costs allocated to the three customers, using the activity rates in (1). Activity Costs The Warehouse $fill in the blank d1108ef8803df8d_4 Kosmo Co. $fill in the blank d1108ef8803df8d_5 Supply Universe $fill in the blank d1108ef8803df8d_6 Feedback 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. Shrute Inc.Customer Profitability ReportFor the Year Ended December 31 The Warehouse Kosmo Co. Supply Universe Revenues $fill in the blank 6a46a1f4003101e_1 $fill in the blank 6a46a1f4003101e_2 $fill in the blank 6a46a1f4003101e_3 Cost of goods sold fill in the blank 6a46a1f4003101e_4 fill in the blank 6a46a1f4003101e_5 fill in the blank 6a46a1f4003101e_6 Gross profit $fill in the blank 6a46a1f4003101e_7 $fill in the blank 6a46a1f4003101e_8 $fill in the blank 6a46a1f4003101e_9 Selling and administrative activities: Customer service $fill in the blank 6a46a1f4003101e_10 $fill in the blank 6a46a1f4003101e_11 $fill in the blank 6a46a1f4003101e_12 Sales order processing fill in the blank 6a46a1f4003101e_13 fill in the blank 6a46a1f4003101e_14 fill in the blank 6a46a1f4003101e_15 Advertising support fill in the blank 6a46a1f4003101e_16 fill in the blank 6a46a1f4003101e_17 fill in the blank 6a46a1f4003101e_18 Total selling and administrative activities $fill in the blank 6a46a1f4003101e_19 fill in the blank 6a46a1f4003101e_20 fill in the blank 6a46a1f4003101e_21 Operating income $fill in the blank 6a46a1f4003101e_22 $fill in the blank 6a46a1f4003101e_23 $fill in the blank 6a46a1f4003101e_24

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter4: Activity-based Costing

Section: Chapter Questions

Problem 5PB: Allocating selling and administrative expenses using activity-based costing Shrute Inc. manufactures...

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llocating 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	$710	per unit
Cost of goods sold	(430)
Gross profit	$280	per unit

In addition, the company incurs selling and administrative expenses of $219,700. 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		$44,100		Number of service requests
Sales order processing		21,600		Number of sales orders
Advertising support		154,000		Number of ads placed
	Total activity cost		$219,700

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	60			10	230	300
Number of sales orders	220			100	480	800
Number of ads placed	20			10	80	110
Unit volume	680			680	680	2,040

Required:

1. Determine the activity rates for each of the three nonmanufacturing activities. Round to the nearest whole dollar.

	Activity Rate
Customer Service	$fill in the blank d1108ef8803df8d_1	per serv. req.
Sales Order Processing	$fill in the blank d1108ef8803df8d_2	per sls. order
Advertising Support	$fill in the blank d1108ef8803df8d_3	per ad

2. Determine the activity costs allocated to the three customers, using the activity rates in (1).

	Activity Costs
The Warehouse	$fill in the blank d1108ef8803df8d_4
Kosmo Co.	$fill in the blank d1108ef8803df8d_5
Supply Universe	$fill in the blank d1108ef8803df8d_6

Feedback

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.

Shrute Inc.Customer Profitability ReportFor the Year Ended December 31

	The Warehouse	Kosmo Co.	Supply Universe
Revenues	$fill in the blank 6a46a1f4003101e_1	$fill in the blank 6a46a1f4003101e_2	$fill in the blank 6a46a1f4003101e_3
Cost of goods sold	fill in the blank 6a46a1f4003101e_4	fill in the blank 6a46a1f4003101e_5	fill in the blank 6a46a1f4003101e_6
Gross profit	$fill in the blank 6a46a1f4003101e_7	$fill in the blank 6a46a1f4003101e_8	$fill in the blank 6a46a1f4003101e_9
Selling and administrative activities:
Customer service	$fill in the blank 6a46a1f4003101e_10	$fill in the blank 6a46a1f4003101e_11	$fill in the blank 6a46a1f4003101e_12
Sales order processing	fill in the blank 6a46a1f4003101e_13	fill in the blank 6a46a1f4003101e_14	fill in the blank 6a46a1f4003101e_15
Advertising support	fill in the blank 6a46a1f4003101e_16	fill in the blank 6a46a1f4003101e_17	fill in the blank 6a46a1f4003101e_18
Total selling and administrative activities	$fill in the blank 6a46a1f4003101e_19	fill in the blank 6a46a1f4003101e_20	fill in the blank 6a46a1f4003101e_21
Operating income	$fill in the blank 6a46a1f4003101e_22	$fill in the blank 6a46a1f4003101e_23	$fill in the blank 6a46a1f4003101e_24

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