Z-Rox Inc. manufactures office copiers, which are sold to retailers. The price and cost of goods sold for each copier are as follows:

Price................................................$890 per unit
Cost of goods sold..........................510
                                                           ____
Gross profit...................................$380 per unit

In addition, the company incurs selling and administrative expenses of $307,150. The company wishes to assign these costs to its three major retail customers, Office Ware-house, Office To-Go, and Office Universe. These expenses are related to its three major non-manufacturing activities: customer service, sales order processing, and advertising sup-port. The advertising support is in the form of advertisements that are placed by Z-Rox Inc. to support the retailer€™s sale of Z-Rox copiers to consumers. The budgeted activity costs and activity bases associated with these activities are:

Activity-base usage and unit volume information for the three customers is as follows:

1. Determine the activity rates for each of the three nonmanufacturing 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, 2012, using the activity costs in (2). The reports should disclose the gross profit and income from operations associated with each customer.
4. Provide recommendations to management, based on the profitability reports in (3).

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Budgeted Activity Cost Activity Base Activity Customer service Sales order processing Advertising support Total activity cost Number of service requests Number of sales orders Number of ads placed $ 54,450 18,700 234,000 $307,150 Office Office Office To-Go Total Warehouse Universe Number of service requests Number of sales orders Number of ads placed Unit volume 20 110 35 330 50 240 20 260 500 850 195 140 650 1,950 650 650