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 $220,070. 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 Shrut Inc. to support the retailer's sale of Shrute copiers to consumers. The budgeted activity costs and activity bases associated with these activities are: Budgeted Activity Activity Activity Base Cost Customer service $41,850 Number of service requests Sales order processing 18,720 Number of sales orders Advertising support 159,500 Number of ads placed Total activity cost $220,070 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 10 230 310 Number of sales orders 220 90 470 780 Number of ads placed 20 10 80 110 Unit volume 570 570 570 1,710 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 customens, 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 41,H50 Sales order processing 11,720 Advertising support 159,500 Total selling and administrative activities 220,070 Income (loss) from operations