Arctic Air Inc. manufactures cooling units for commercialbuildings. The price and cost of goods sold for each unit are asfollows:CategoryPer Unit Dollar AmountPrice$60,000Cost of goods soldGross profit28,00032,000In addition, the company incurs selling and administrativeexpenses of $226,250. The company wishes to assign these coststo its three major customers, Gough Industries, Breen Inc., andThe Martin Group. These expenses are related to three majornonmanufacturing activities: customer service, project bidding,and engineering support. The engineering support is in the formof engineering changes that are placed by the customer tochange the design of a product. The budgeted activity costs andactivity bases associated with these activities are:Budgeted Activity CostActivity Base$51,500 Number of service requestsActivityCustomer serviceProject biddingEngineering support64,000 Number of bids110,500 Number of customer design changesTotal costs226,000Activity-base usage and unit volume information for the threecustomers is as follows:ActivityNumber of service requestsGough Industries Breen Inc. The Martin Group Total3527115177Number of bids504095185Number of customer design changes1835108161Unit volume301650Instructionsa. Determine the activity rates for each of the threenonmanufacturing activity pools.b. Determine the activity costs allocated to the threecustomers, using the activity rates in (a).c. Construct customer profitability reports for the threecustomers, dated for the year ended December 31, using theactivity costs in (b). The reports should disclose the grossprofit and income from operations associated with eachcustomer.d. Provide recommendations to management on howoperations can be improved based on the profitabilityreports in (c).

Name: Arctic Air Inc. manufactures cooling units for commercialbuildings. T
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Description: Arctic Air Inc. manufactures cooling units for commercialbuildings. The price and cost of goods sold for each unit are asfollows:CategoryPer Unit Dollar AmountPrice$60,000Cost of goods soldGross profit28,00032,000In addition, the company incurs sell

Answered: a. Determine the activity rates for…

Business

Accounting

a. Determine the activity rates for each of the three nonmanufacturing activity pools.

Principles of Cost Accounting

17th Edition

ISBN:9781305087408

Author:Edward J. Vanderbeck, Maria R. Mitchell

Publisher:Edward J. Vanderbeck, Maria R. Mitchell

Chapter10: Cost Analysis For Management Decision Making

Section: Chapter Questions

Problem 18E

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