Cold Zone Mechancial Inc. manufactures cooling units forcommercial buildings. The price and cost of goods sold for eachunit are as follows:
1 Price per unit $74,400.00
2 Cost of goods sold 62,500.00
3 Gross profit per unit $11,900.00
In addition, the company incurs selling and administrativeexpenses of $247,422.
The company wishes to assign these costs to its three majorcustomers, Good Knowledge University, Hot Shotz Arena, andBreak-a-Leg Hospital. These expenses are related to three majornonmanufacturing activities: customer service, project bidding, andengineering support. The engineering support is in the form ofengineering changes that are placed by the customer to change thedesign of a product. The budgeted activity costs and activity basesassociated with these activities are:
1 Activity Budgeted Activity Cost Activity Base
2 Customer service $93,195.00 Number of service requests
3 Project bidding 64,155.00 Number of bids
4 Engineering support 90,072.00 Number of customer designchanges
5 Total costs $247,422.00
Activity-base usage and unit volume information for the threecustomers is as follows:
Good Knowledge Hot Shotz Break-a-Leg University Arena HospitalTotal Number of service requests 55 53 219 327
Number of bids 38 20 47 105 Number of customer design changes 4229 145 216
Unit volume 21 13 6 40
Required:
1. Determine the activity rates for each of the threenonmanufacturing activity pools.
2. Determine the activity costs allocated to the threecustomers, using the activity rates in (1). 3. Construct customerprofitability reports for the three customers, dated for the yearended December 31, using the activity costs in (2). The reportsshould disclose the gross profit and income from operationsassociated with each customer. Refer to the lists of Labels andAmount Descriptions for the exact wording of the answer choices fortext entries. Be sure to complete the statement heading. âLessâ,âPlusâ or colons (:) will automatically appear if required. Enterall amounts as positive numbers, except for a negative income fromoperations.
Cold Zone Mechancial Inc. manufactures cooling units forcommercial buildings. The price and cost of goods sold for eachunit are as follows:
1 Price per unit $74,400.00
2 Cost of goods sold 62,500.00
3 Gross profit per unit $11,900.00
In addition, the company incurs selling and administrativeexpenses of $247,422.
The company wishes to assign these costs to its three majorcustomers, Good Knowledge University, Hot Shotz Arena, andBreak-a-Leg Hospital. These expenses are related to three majornonmanufacturing activities: customer service, project bidding, andengineering support. The engineering support is in the form ofengineering changes that are placed by the customer to change thedesign of a product. The budgeted activity costs and activity basesassociated with these activities are:
1 Activity Budgeted Activity Cost Activity Base
2 Customer service $93,195.00 Number of service requests
3 Project bidding 64,155.00 Number of bids
4 Engineering support 90,072.00 Number of customer designchanges
5 Total costs $247,422.00
Activity-base usage and unit volume information for the threecustomers is as follows:
Good Knowledge Hot Shotz Break-a-Leg University Arena HospitalTotal Number of service requests 55 53 219 327
Number of bids 38 20 47 105 Number of customer design changes 4229 145 216
Unit volume 21 13 6 40
Required:
1. Determine the activity rates for each of the threenonmanufacturing activity pools.
2. Determine the activity costs allocated to the threecustomers, using the activity rates in (1). 3. Construct customerprofitability reports for the three customers, dated for the yearended December 31, using the activity costs in (2). The reportsshould disclose the gross profit and income from operationsassociated with each customer. Refer to the lists of Labels andAmount Descriptions for the exact wording of the answer choices fortext entries. Be sure to complete the statement heading. âLessâ,âPlusâ or colons (:) will automatically appear if required. Enterall amounts as positive numbers, except for a negative income fromoperations.
Related questions
Cold Zone Mechancial Inc. manufactures cooling units for commercial buildings. The price and cost of goods sold for each unit are as follows:
| 1 | Price per unit | $75,000.00 |
| 2 | Cost of goods sold | 60,000.00 |
| 3 | Gross profit per unit | $15,000.00 |
In addition, the company incurs selling and administrative expenses of $231,880. The company wishes to assign these costs to its three major customers, Good Knowledge University, Hot Shotz Arena, and Break-a-Leg Hospital. These expenses are related to three major nonmanufacturing activities: customer service, project bidding, and engineering support. The engineering support is in the form of engineering changes that are placed by the customer to change the design of a product. The budgeted activity costs and activity bases associated with these activities are:
| 1 | Activity | Budgeted Activity Cost | Activity Base |
| 2 | Customer service | $83,720.00 | Number of service requests |
| 3 | Project bidding | 61,360.00 | Number of bids |
| 4 | Engineering support | 86,800.00 | Number of customer design changes |
| 5 | Total costs | $231,880.00 |
Activity-base usage and unit volume information for the three customers is as follows:
| Good Knowledge | Hot Shotz | Break-a-Leg | ||
|---|---|---|---|---|
| University | Arena | Hospital | Total | |
| Number of service requests | 60 | 52 | 210 | 322 |
| Number of bids | 36 | 18 | 50 | 104 |
| Number of customer design changes | 45 | 30 | 142 | 217 |
| Unit volume | 22 | 14 | 6 | 42 |
| Required: | |
| 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 the three customers, dated for the year ended December 31, using the activity costs in (2). The reports should disclose the gross profit and income from operations associated with each customer. Refer to the lists of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. Be sure to complete the statement heading. âLessâ, âPlusâ or colons (:) will automatically appear if required. Enter all amounts as positive numbers, except for a negative income from operations. |
Cold Zone Mechancial Inc. manufactures cooling units for commercial buildings. The price and cost of goods sold for each unit are as follows:
| 1 | Price per unit | $75,000.00 |
| 2 | Cost of goods sold | 60,000.00 |
| 3 | Gross profit per unit | $15,000.00 |
In addition, the company incurs selling and administrative expenses of $231,880. The company wishes to assign these costs to its three major customers, Good Knowledge University, Hot Shotz Arena, and Break-a-Leg Hospital. These expenses are related to three major nonmanufacturing activities: customer service, project bidding, and engineering support. The engineering support is in the form of engineering changes that are placed by the customer to change the design of a product. The budgeted activity costs and activity bases associated with these activities are:
| 1 | Activity | Budgeted Activity Cost | Activity Base |
| 2 | Customer service | $83,720.00 | Number of service requests |
| 3 | Project bidding | 61,360.00 | Number of bids |
| 4 | Engineering support | 86,800.00 | Number of customer design changes |
| 5 | Total costs | $231,880.00 |
Activity-base usage and unit volume information for the three customers is as follows:
| Good Knowledge | Hot Shotz | Break-a-Leg | ||
|---|---|---|---|---|
| University | Arena | Hospital | Total | |
| Number of service requests | 60 | 52 | 210 | 322 |
| Number of bids | 36 | 18 | 50 | 104 |
| Number of customer design changes | 45 | 30 | 142 | 217 |
| Unit volume | 22 | 14 | 6 | 42 |
| Required: | |
| 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 the three customers, dated for the year ended December 31, using the activity costs in (2). The reports should disclose the gross profit and income from operations associated with each customer. Refer to the lists of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. Be sure to complete the statement heading. âLessâ, âPlusâ or colons (:) will automatically appear if required. Enter all amounts as positive numbers, except for a negative income from operations. |
X
Labels and Amount Descriptions
| Labels | |
| December 31 | |
| For the Year Ended December 31 | |
| Selling and administrative activities | |
| Amount Descriptions | |
| Break-a-Leg Hospital | |
| Cost of goods sold | |
| Customer service | |
| Engineering support | |
| Good Knowledge University | |
| Gross profit | |
| Hot Shotz Arena | |
| Income from operations | |
| Other income (expense) | |
| Plantwide factory overhead rate | |
| Product cost distortion | |
| Project bidding | |
| Revenues | |
| Total selling and administrative activities |
X
Activity rates
Shaded cells have feedback.
1. Determine the activity rates for each of the three nonmanufacturing activity pools.
Score: 30/30
| 1 | â | â | per serv. req. |
| 2 | â | â | per bid |
| 3 | â | â | per design change |
Points:
6 / 6
Feedback
Check My Work
Calculate for each activity:
Total activity cost ÷ Total activity base = Activity Rate
X
Activity Costs
Shaded cells have feedback.
2. Determine the activity costs allocated to the three customers, using the activity rates in (1).
Score: 30/30
| 1 | Activity Costs | |
| 2 | â | â |
| 3 | â | â |
| 4 | â | â |
Points:
6 / 6
Feedback
Check My Work
Calculate for each customer:
Activity usage x Activity rate from Req. (1) = Activity cost; Sum all activity costs per customer to determine a total and divide the total overhead by budgeted units to derive the activity costs per unit for each customer.
X
Customer Profitability Report
Shaded cells have 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 income from operations associated with each customer. Refer to the lists of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. Be sure to complete the statement heading. âLessâ, âPlusâ or colons (:) will automatically appear if required. Enter all amounts as positive numbers, except for a negative income from operations.
Score: 67/137
| Cold Zone Mechanical Inc. |
| Customer Profitability Report |
| â |
| 1 | Good Knowledge University | Hot Shotz Arena | Break-a-Leg Hospital | |
| 2 | ||||
| 3 | ||||
| 4 | â | |||
| 5 | ||||
| 6 | â | â | â | â |
| 7 | â | â | â | â |
| 8 | â | â | â | â |
| 9 | ||||
| 10 | â |
Points:
16.63 / 34
Feedback
Cold Zone Mechancial Inc. manufactures cooling units for commercial buildings. The price and cost of goods sold for each unit are as follows:
| 1 | Price per unit | $77,500.00 |
| 2 | Cost of goods sold | 59,700.00 |
| 3 | Gross profit per unit | $17,800.00 |
In addition, the company incurs selling and administrative expenses of $223,921. The company wishes to assign these costs to its three major customers, Good Knowledge University, Hot Shotz Arena, and Break-a-Leg Hospital. These expenses are related to three major nonmanufacturing activities: customer service, project bidding, and engineering support. The engineering support is in the form of engineering changes that are placed by the customer to change the design of a product. The budgeted activity costs and activity bases associated with these activities are:
| 1 | Activity | Budgeted Activity Cost | Activity Base |
| 2 | Customer service | $76,544.00 | Number of service requests |
| 3 | Project bidding | 61,711.00 | Number of bids |
| 4 | Engineering support | 85,666.00 | Number of customer design changes |
| 5 | Total costs | $223,921.00 |
Activity-base usage and unit volume information for the three customers is as follows:
| Good Knowledge | Hot Shotz | Break-a-Leg | ||
|---|---|---|---|---|
| University | Arena | Hospital | Total | |
| Number of service requests | 59 | 49 | 191 | 299 |
| Number of bids | 35 | 18 | 48 | 101 |
| Number of customer design changes | 49 | 28 | 134 | 211 |
| Unit volume | 20 | 14 | 6 | 40 |
| Required: | |
| 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 the three customers, dated for the year ended December 31, using the activity costs in (2). The reports should disclose the gross profit and income from operations associated with each customer. Refer to the lists of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. Be sure to complete the statement heading. âLessâ, âPlusâ or colons (:) will automatically appear if required. Enter all amounts as positive numbers, except for a negative income from operations. |
