Super Cool Inc, manufactures cooling units for commercial buildings. The price and cost of goods sold for
Question:
Super Cool Inc, manufactures cooling units for commercial buildings. The price and cost of
goods sold for each unit are as follows:
Price 40,500 per unit
Cost of goods sold 25,500
Gross Profit 1 5,000 per unit
In addition, the company incurs selling and administrative expense of 160,400. The company
wishes to assign these costs to its three major customers, Goljes University, Biggest Arena, and
NE Hospital. These expenses are related to three non-manufacturing activities: customer
service, project bidding and engineering support. Engineering support is in the form of
engineering changes that are placed by the customers to change the design of a product. The
activity cost pool and activity bases associated with these activities are:
Activity Activity Cost Pool Activity Base
Customer Service 66,500 Number of service requests
Project bidding 34,500 Number of bids
Engineering support 59,400 Number of customer design
Total costs 160,400
Activity based usage and unit volume information for three customers is as follows:
Goljes Univ. Biggest Arena NE Hospital Total
Number of request 110 35 45
190
Number of bids 14 12 20
46
Number of designs 75 25 35
135
Unit volume 5 10 15
30
Required:
1. Determined activity rates for each of three non-manufacturing activity cost pools
2. Determine the activity costs allocated to three customers using activity rates in (1)
3. Construct customer profitability reports for the three, using activity costs in (2). The
reports should disclose the gross profit and income from operations associated with
each customer
4. Construct customers' profitability report for the three customers, using the traditional
costing system where the company allocates non-manufacturing costs using the unit
volume. The reports should disclose the gross profit and income from operations
associated with each customer
Expert Answer:
Lets break down the problem step by step Step 1 Determine activity rates for each nonmanufacturing activity cost pool We need to calculate the activity rate for each activity cost pool by dividing the ... View the full answer
