Construct and Interpret a Product Profitability Report, Allocating Selling and Administrative Expenses. Naper Inc. manufactures power equipment. Naper has two primary products-generators and air compressors. The following report was prepared by the controller for Naper's senior marketing management for the year ended December 31: Air Generators Compressors Total Revenue Cost of goods sold Gross profit $4,200,000 $3,000,000 $7,200,000 (2,940,000) $1,260,000 (2,100,000) (5,040,000) $900,000 $2,160,000 Selling and administrative expenses (610,000) Income from operations $1,550,000 The marketing management team was concerned that the selling and administrative expenses were not traced to the products. Marketing management believed that some products consumed larger amounts of selling and administrative expense than did other products. To verify this, the controller was asked to prepare a complete product profitability report, using activity-based costing. The controller determined that selling and administrative expenses consisted of two activities: sales order processing and post-sale customer service. The controller was able to determine the activity base and activity rate for each activity, as follows: Activity Activity Base Activity Rate Sales order processing Sales orders $65 per sales order