Price $60,000 per unit Cost of goods sold 28,000 Gross profit $32,000 per unit Budgeted Activity Activity Activity Base Cost Gustomer $ 31,500 Number of service requests service Project bidding74,000 Number of bids Engineering Number of customer design 120,750 support changes Total costs $226,250 Activity- base usage and unit volume information for the three customers is as follows: Gough Industries Breen The Martin Total Inc. Group Number of service 36 28 116 180 requests Number of bids 50 40 95 185 Number of customer 18 35 108 161 design changes Unit volume 30 16 4 50

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
icon
Related questions
Question

Allocating selling and administrative expenses using activity - based costing 

Artic Air Inc. manufactures cooling units for commercial buildings.The price and cost of goods sold for each units are as follows:

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 three major nonmanufacturing activities:customer services,project bidding,and engineering support.The engineering support is in the form of engineering changes thet are placed by the customer to change the design of a product.The budgeted activity costs and activity bases associated with these activities are:

instructions

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

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

3.Construct customer profitability reports for tile three customers,dated for the year ended December 31,using the activity costs in (2).The report should disclose the gross profit and income from operations associated with each customer.

4.Provide recommendations to management, based on the profitability reports im (3)

Price
$60,000 per unit
Cost of goods sold 28,000
Gross profit
$32,000 per unit
Transcribed Image Text:Price $60,000 per unit Cost of goods sold 28,000 Gross profit $32,000 per unit
Budgeted Activity
Activity
Activity Base
Cost
Gustomer
$ 31,500
Number of service requests
service
Project bidding74,000
Number of bids
Engineering
Number of customer design
120,750
support
changes
Total costs
$226,250
Activity- base usage and unit volume information for the three
customers is as follows:
Gough
Industries
Breen The Martin
Total
Inc.
Group
Number of service
36
28
116
180
requests
Number of bids
50
40
95
185
Number of customer
18
35
108
161
design changes
Unit volume
30
16
4
50
Transcribed Image Text:Budgeted Activity Activity Activity Base Cost Gustomer $ 31,500 Number of service requests service Project bidding74,000 Number of bids Engineering Number of customer design 120,750 support changes Total costs $226,250 Activity- base usage and unit volume information for the three customers is as follows: Gough Industries Breen The Martin Total Inc. Group Number of service 36 28 116 180 requests Number of bids 50 40 95 185 Number of customer 18 35 108 161 design changes Unit volume 30 16 4 50
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 4 steps with 4 images

Blurred answer
Knowledge Booster
Cost classification
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education