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 15,000 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

Answer rating: 100% (QA)

Lets break down each step 1 Activity Rates Customer Service 66500 190 requests 350 per request Proje... View the full answer