Question

In: Accounting

Allocating Selling and Administrative Expenses using Activity-Based Costing Shrute Inc. manufactures office copiers, which are sold...

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 $730 per unit
Cost of goods sold 440
Gross profit $290 per unit

In addition, the company incurs selling and administrative expenses of $232,160. 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 $48,640 Number of service requests
Sales order processing 29,920 Number of sales orders
Advertising support 153,600 Number of ads placed
Total activity cost $232,160

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 70 10 240 320
Number of sales orders 250 110 520 880
Number of ads placed 20 10 90 120
Unit volume 630 630 630 1,890

Required:

1. Determine the activity rates for each of the three nonmanufacturing activities. Round to the nearest whole dollar.

Activity Rate
Customer Service $ per serv. req.
Sales Order Processing $ per bid
Advertising Support $ per customer design change

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

Activity Costs
The Warehouse $
Kosmo Co. $
Supply Universe $

3. Construct customer profitability reports for the three customers, dated for the year ended December 31, 2016, using the activity costs in (2). The reports should disclose the gross profit and income from operations associated with each customer. Enter all amounts as positive numbers, except for a negative income from operations.

Shrute Inc.
Customer Profitability Report
For the Year Ended December 31
The Warehouse Kosmo Co. Supply Universe
Revenues $ $ $
Cost of goods sold
Gross profit $ $ $
Selling and administrative activities:
Customer service $ $ $
Sales order processing
Advertising support
Total selling and administrative activities $
Income (loss) from operations $ $ $

Solutions

Expert Solution

Answer 1

The activity rates for each of the three nonmanufacturing activities

Activity cost

Total number of activity

Activity rate(activity cost/total number of activity)

Customer Service

$48640

320

$                152

Per serv. Req.

Sales Order Processing

$29920

880

$                  34

Per bid

Advertising Support

$153600

120

$            1,280

Per customer design change

Answer 2

The activity costs allocated to the three customers

Activity rate

Number of activity

Total(activity rate*number of activity)

The Warehouse

Customer Service

$                152

70

$          10,640

Sales Order Processing

$                  34

250

$            8,500

Advertising Support

$            1,280

20

$          25,600

$          44,740

Kosmo Co.

Customer Service

$                152

10

$            1,520

Sales Order Processing

$                  34

110

$            3,740

Advertising Support

$            1,280

10

$          12,800

$          18,060

Supply Universe

Customer Service

$                152

240

$          36,480

Sales Order Processing

$                  34

520

$          17,680

Advertising Support

$            1,280

90

$        115,200

$        169,360

Activity Costs

The Warehouse

$          44,740

Kosmo Co.

$          18,060

Supply Universe

$        169,360

Answer 3

Shrute Inc.

Customer Profitability Report

For the Year Ended December 31

The Warehouse

Kosmo Co.

Supply Universe

Revenues(630 units*selling price)

459900

459900

459900

Cost of goods sold

277200

277200

277200

Gross profit

182700

182700

182700

Selling and administrative activities:

Customer service

10640

1520

36480

sales order processing

8500

3740

17680

Advertising support

25600

12800

115200

Total selling and administrative activities

44740

18060

169360

Income (loss) from operations

137960

164640

13340

ekkarill92 answered 2 years ago
Next > < Previous

Related Solutions

Allocating Selling and Administrative Expenses using Activity-Based Costing Shrute Inc. manufactures office copiers, which are sold...
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$690 per unit Cost of goods sold(410) Gross profit$280 per unit In addition, the company incurs selling and administrative expenses of $263,410. 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...
Allocating Selling and Administrative Expenses using Activity-Based Costing Shrute Inc. manufactures office copiers, which are sold...
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 $276,980. The company wishes to assign these costs to its three major retail customers, The Warehouse, Kosmo Co., and Supply Universe. These expenses are related...
Allocating Selling and Administrative Expenses using Activity-Based Costing Shrute Inc. manufactures office copiers, which are sold...
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 $720 per unit Cost of goods sold (430) Gross profit $290 per unit In addition, the company incurs selling and administrative expenses of $226,570. The company wishes to assign these costs to its three major retail customers, The Warehouse, Kosmo Co., and Supply Universe. These expenses are related...
Allocating Selling and Administrative Expenses using Activity-Based Costing Shrute Inc. manufactures office copiers, which are sold...
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 $700 per unit Cost of goods sold 420 Gross profit $280 per unit In addition, the company incurs selling and administrative expenses of $270,510. The company wishes to assign these costs to its three major retail customers, The Warehouse, Kosmo Co., and Supply Universe. These expenses are related...
eBook Show Me How Calculator Print Item Allocating Selling and Administrative Expenses using Activity-Based Costing Shrute...
eBook Show Me How Calculator Print Item 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 $750 per unit Cost of goods sold 450 Gross profit $300 per unit In addition, the company incurs selling and administrative expenses of $226,700. The company wishes to assign these costs to its three major retail customers, The Warehouse, Kosmo Co.,...
Allocating Selling and Administrative Expenses using Activity-Based Costing Arctic Air Inc. manufactures cooling units for commercial...
Allocating Selling and Administrative Expenses using Activity-Based Costing Arctic Air Inc. manufactures cooling units for commercial buildings. The price and cost of goods sold for each unit are as follows: Price $60,000 per unit Cost of goods sold (28,000) Gross profit $32,000 per unit In addition, the company incurs selling and administrative expenses of $226,250. The company wishes to assign these costs to its three major customers, Gough Industries, Breen Inc., and The Martin Group. These expenses are related to...
Activity-Based Costing: Selling and Administrative Expenses Jungle Junior Company manufactures and sells outdoor play equipment. Jungle...
Activity-Based Costing: Selling and Administrative Expenses Jungle Junior Company manufactures and sells outdoor play equipment. Jungle Junior uses activity-based costing to determine the cost of the sales order processing and the customer return activity. The sales order processing activity has an activity rate of $75 per sales order, and the customer return activity has an activity rate of $15 per return. Jungle Junior sold 10,000 swing sets, which consisted of 2,800 orders and 300 returns. a. Determine the total sales...
Construct and Interpret a Product Profitability Report, Allocating Selling and Administrative Expenses Naper Inc. manufactures power...
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: Generators Air Compressors Total Revenue $4,200,000 $3,000,000 $7,200,000 Cost of goods sold 2,940,000 2,100,000 5,040,000 Gross profit $1,260,000 $900,000 $2,160,000 Selling and administrative expenses 610,000 Income from operations $1,550,000 The marketing management team was concerned that...
Construct and Interpret a Product Profitability Report, Allocating Selling and Administrative Expenses Naper Inc. manufactures power...
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: Generators Air Compressors Total Revenue $1,796,440 $2,752,720 $4,549,160 Cost of goods sold 1,347,330 2,064,540 3,411,870 Gross profit $449,110 $688,180 $1,137,290 Selling and administrative expenses 246,690 Income from operations $890,600 The marketing management team was concerned that...
Construct and Interpret a Product Profitability Report, Allocating Selling and Administrative Expenses Naper Inc. manufactures power...
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: Generators Air Compressors Total Revenue $4,200,000 $3,000,000 $7,200,000 Cost of goods sold 2,940,000 2,100,000 5,040,000 Gross profit $1,260,000 $900,000 $2,160,000 Selling and administrative expenses 610,000 Income from operations $1,550,000 The marketing management team was concerned that...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT