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 $650 per unit Cost of goods sold (390) Gross profit $260 per unit In addition, the company incurs selling and administrative expenses of $227,280. 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 $34,000 Number of service requests Sales order processing 30,080 Number of sales orders Advertising support 163,200 Number of ads placed Total activity cost $227,280 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 50 10 190 250 Number of sales orders 260 110 570 940 Number of ads placed 20 10 90 120 Unit volume 680 680 680 2,040 Required: 2. Determine the activity costs allocated to the three customers, using the activity rates in (1). Activity Costs The Warehouse $fill in the blank 8354cd0de00d024_4 Kosmo Co. $fill in the blank 8354cd0de00d024_5 Supply Universe $fill in the blank 8354cd0de00d024_6 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 db1aa6f5e021027_1 $fill in the blank db1aa6f5e021027_2 $fill in the blank db1aa6f5e021027_3 Cost of goods sold fill in the blank db1aa6f5e021027_4 fill in the blank db1aa6f5e021027_5 fill in the blank db1aa6f5e021027_6 Gross profit $fill in the blank db1aa6f5e021027_7 $fill in the blank db1aa6f5e021027_8 $fill in the blank db1aa6f5e021027_9 Selling and administrative activities: Customer service $fill in the blank db1aa6f5e021027_10 $fill in the blank db1aa6f5e021027_11 $fill in the blank db1aa6f5e021027_12 Sales order processing fill in the blank db1aa6f5e021027_13 fill in the blank db1aa6f5e021027_14 fill in the blank db1aa6f5e021027_15 Advertising support fill in the blank db1aa6f5e021027_16 fill in the blank db1aa6f5e021027_17 fill in the blank db1aa6f5e021027_18 Total selling and administrative activities $fill in the blank db1aa6f5e021027_19 fill in the blank db1aa6f5e021027_20 fill in the blank db1aa6f5e021027_21 Operating income $fill in the blank db1aa6f5e021027_22 $fill in the blank db1aa6f5e021027_23 $fill in the blank db1aa6f5e021027_24

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 $650 per unit Cost of goods sold (390) Gross profit $260 per unit In addition, the company incurs selling and administrative expenses of $227,280. 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 $34,000 Number of service requests Sales order processing 30,080 Number of sales orders Advertising support 163,200 Number of ads placed Total activity cost $227,280 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 50 10 190 250 Number of sales orders 260 110 570 940 Number of ads placed 20 10 90 120 Unit volume 680 680 680 2,040 Required: 2. Determine the activity costs allocated to the three customers, using the activity rates in (1). Activity Costs The Warehouse $fill in the blank 8354cd0de00d024_4 Kosmo Co. $fill in the blank 8354cd0de00d024_5 Supply Universe $fill in the blank 8354cd0de00d024_6 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 db1aa6f5e021027_1 $fill in the blank db1aa6f5e021027_2 $fill in the blank db1aa6f5e021027_3 Cost of goods sold fill in the blank db1aa6f5e021027_4 fill in the blank db1aa6f5e021027_5 fill in the blank db1aa6f5e021027_6 Gross profit $fill in the blank db1aa6f5e021027_7 $fill in the blank db1aa6f5e021027_8 $fill in the blank db1aa6f5e021027_9 Selling and administrative activities: Customer service $fill in the blank db1aa6f5e021027_10 $fill in the blank db1aa6f5e021027_11 $fill in the blank db1aa6f5e021027_12 Sales order processing fill in the blank db1aa6f5e021027_13 fill in the blank db1aa6f5e021027_14 fill in the blank db1aa6f5e021027_15 Advertising support fill in the blank db1aa6f5e021027_16 fill in the blank db1aa6f5e021027_17 fill in the blank db1aa6f5e021027_18 Total selling and administrative activities $fill in the blank db1aa6f5e021027_19 fill in the blank db1aa6f5e021027_20 fill in the blank db1aa6f5e021027_21 Operating income $fill in the blank db1aa6f5e021027_22 $fill in the blank db1aa6f5e021027_23 $fill in the blank db1aa6f5e021027_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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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	$650	per unit
Cost of goods sold	(390)
Gross profit	$260	per unit

In addition, the company incurs selling and administrative expenses of $227,280. 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		$34,000		Number of service requests
Sales order processing		30,080		Number of sales orders
Advertising support		163,200		Number of ads placed
	Total activity cost		$227,280

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	50			10	190	250
Number of sales orders	260			110	570	940
Number of ads placed	20			10	90	120
Unit volume	680			680	680	2,040

Required:

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

	Activity Costs
The Warehouse	$fill in the blank 8354cd0de00d024_4
Kosmo Co.	$fill in the blank 8354cd0de00d024_5
Supply Universe	$fill in the blank 8354cd0de00d024_6

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 db1aa6f5e021027_1	$fill in the blank db1aa6f5e021027_2	$fill in the blank db1aa6f5e021027_3
Cost of goods sold	fill in the blank db1aa6f5e021027_4	fill in the blank db1aa6f5e021027_5	fill in the blank db1aa6f5e021027_6
Gross profit	$fill in the blank db1aa6f5e021027_7	$fill in the blank db1aa6f5e021027_8	$fill in the blank db1aa6f5e021027_9
Selling and administrative activities:
Customer service	$fill in the blank db1aa6f5e021027_10	$fill in the blank db1aa6f5e021027_11	$fill in the blank db1aa6f5e021027_12
Sales order processing	fill in the blank db1aa6f5e021027_13	fill in the blank db1aa6f5e021027_14	fill in the blank db1aa6f5e021027_15
Advertising support	fill in the blank db1aa6f5e021027_16	fill in the blank db1aa6f5e021027_17	fill in the blank db1aa6f5e021027_18
Total selling and administrative activities	$fill in the blank db1aa6f5e021027_19	fill in the blank db1aa6f5e021027_20	fill in the blank db1aa6f5e021027_21
Operating income	$fill in the blank db1aa6f5e021027_22	$fill in the blank db1aa6f5e021027_23	$fill in the blank db1aa6f5e021027_24

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