llocating 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 $710 per unit Cost of goods sold (430) Gross profit $280 per unit In addition, the company incurs selling and administrative expenses of $219,700. 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 $44,100 Number of service requests Sales order processing 21,600 Number of sales orders Advertising support 154,000 Number of ads placed Total activity cost $219,700 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 60 10 230 300 Number of sales orders 220 100 480 800 Number of ads placed 20 10 80 110 Unit volume 680 680 680 2,040 Required: 1. Determine the activity rates for each of the three nonmanufacturing activities. Round to the nearest whole dollar. Activity Rate Customer Service $fill in the blank d1108ef8803df8d_1 per serv. req. Sales Order Processing $fill in the blank d1108ef8803df8d_2 per sls. order Advertising Support $fill in the blank d1108ef8803df8d_3 per ad 2. Determine the activity costs allocated to the three customers, using the activity rates in (1). Activity Costs The Warehouse $fill in the blank d1108ef8803df8d_4 Kosmo Co. $fill in the blank d1108ef8803df8d_5 Supply Universe $fill in the blank d1108ef8803df8d_6 Feedback 3. Construct customer profitability reports for the three customers, dated for the year ended December 31, using the activity costs in (2). The reports should disclose the gross profit and operating income associated with each customer. Shrute Inc.Customer Profitability ReportFor the Year Ended December 31 The Warehouse Kosmo Co. Supply Universe Revenues $fill in the blank 6a46a1f4003101e_1 $fill in the blank 6a46a1f4003101e_2 $fill in the blank 6a46a1f4003101e_3 Cost of goods sold fill in the blank 6a46a1f4003101e_4 fill in the blank 6a46a1f4003101e_5 fill in the blank 6a46a1f4003101e_6 Gross profit $fill in the blank 6a46a1f4003101e_7 $fill in the blank 6a46a1f4003101e_8 $fill in the blank 6a46a1f4003101e_9 Selling and administrative activities: Customer service $fill in the blank 6a46a1f4003101e_10 $fill in the blank 6a46a1f4003101e_11 $fill in the blank 6a46a1f4003101e_12 Sales order processing fill in the blank 6a46a1f4003101e_13 fill in the blank 6a46a1f4003101e_14 fill in the blank 6a46a1f4003101e_15 Advertising support fill in the blank 6a46a1f4003101e_16 fill in the blank 6a46a1f4003101e_17 fill in the blank 6a46a1f4003101e_18 Total selling and administrative activities $fill in the blank 6a46a1f4003101e_19 fill in the blank 6a46a1f4003101e_20 fill in the blank 6a46a1f4003101e_21 Operating income $fill in the blank 6a46a1f4003101e_22 $fill in the blank 6a46a1f4003101e_23 $fill in the blank 6a46a1f4003101e_24
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
llocating 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 | $710 | per unit |
| Cost of goods sold | (430) | |
| Gross profit | $280 | per unit |
In addition, the company incurs selling and administrative expenses of $219,700. 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 | $44,100 | Number of service requests | |||
| Sales order processing | 21,600 | Number of sales orders | |||
| Advertising support | 154,000 | Number of ads placed | |||
| Total activity cost | $219,700 |
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 | 60 | 10 | 230 | 300 | |||||
| Number of sales orders | 220 | 100 | 480 | 800 | |||||
| Number of ads placed | 20 | 10 | 80 | 110 | |||||
| Unit volume | 680 | 680 | 680 | 2,040 |
Required:
1. Determine the activity rates for each of the three nonmanufacturing activities. Round to the nearest whole dollar.
| Activity Rate | ||
| Customer Service | $fill in the blank d1108ef8803df8d_1 | per serv. req. |
| Sales Order Processing | $fill in the blank d1108ef8803df8d_2 | per sls. order |
| Advertising Support | $fill in the blank d1108ef8803df8d_3 | per ad |
2. Determine the activity costs allocated to the three customers, using the activity rates in (1).
| Activity Costs | |
| The Warehouse | $fill in the blank d1108ef8803df8d_4 |
| Kosmo Co. | $fill in the blank d1108ef8803df8d_5 |
| Supply Universe | $fill in the blank d1108ef8803df8d_6 |
3. Construct customer profitability reports for the three customers, dated for the year ended December 31, using the activity costs in (2). The reports should disclose the gross profit and operating income associated with each customer.
| The Warehouse | Kosmo Co. | Supply Universe | |
| Revenues | $fill in the blank 6a46a1f4003101e_1 | $fill in the blank 6a46a1f4003101e_2 | $fill in the blank 6a46a1f4003101e_3 |
| Cost of goods sold | fill in the blank 6a46a1f4003101e_4 | fill in the blank 6a46a1f4003101e_5 | fill in the blank 6a46a1f4003101e_6 |
| Gross profit | $fill in the blank 6a46a1f4003101e_7 | $fill in the blank 6a46a1f4003101e_8 | $fill in the blank 6a46a1f4003101e_9 |
| Selling and administrative activities: | |||
| Customer service | $fill in the blank 6a46a1f4003101e_10 | $fill in the blank 6a46a1f4003101e_11 | $fill in the blank 6a46a1f4003101e_12 |
| Sales order processing | fill in the blank 6a46a1f4003101e_13 | fill in the blank 6a46a1f4003101e_14 | fill in the blank 6a46a1f4003101e_15 |
| Advertising support | fill in the blank 6a46a1f4003101e_16 | fill in the blank 6a46a1f4003101e_17 | fill in the blank 6a46a1f4003101e_18 |
| Total selling and administrative activities | $fill in the blank 6a46a1f4003101e_19 | fill in the blank 6a46a1f4003101e_20 | fill in the blank 6a46a1f4003101e_21 |
| Operating income | $fill in the blank 6a46a1f4003101e_22 | $fill in the blank 6a46a1f4003101e_23 | $fill in the blank 6a46a1f4003101e_24 |
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