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4:42 PM v2.cengagenow.com Cengage O CengageNOWv2 | Online teaching and learning resource from Ce ter 11: Homework Allocating selling and administrative expenses using activity-based costing Labels and Amount Descriptions Activity rates Activity Costs Cold Zone Mechancial Inc. manufactures cooling units for commercial buildings. The price and cost of goods sold for each unit are as 1 Price per u 77,500.00 9.700.00 17,800.00 Cost of goods sold Gross profin per unit administrative expenses of $223,921. The company wishes to assign these costs to its three In addition, the company incurs selling and major customers, Good Knowledge University, Hot Shotz Arena, and Break-a-Leg nonmanufacturing activities: customer service, project bidding, and engineering support. The engineering support is in I. These expenses are related to three major the form of the customer to change the design of a product. The budgeted activity costs and astivity bases associated with these activities are: My Work 5 more Check My Work uses remaning 2 W IE

Explanation / Answer

Answer 1. Activity Overhead Cost Driver Quantity Activity Rate Customer Service                                76,544                                    299 service request                      256.00 per service request Project Bidding                                61,711                                    101 bids                      611.00 per bids Engineering Support                                85,666                                    211 design changes                      406.00 per design change Total                             223,921 Answer 2. Assigning Overhead Cost to Product Using ABC Method Activity Based Overhead Rate Good Knowledge University Hot Shotz Arena Break-a-leg Hospital Cost Driver Incurred OH Allocated Cost Driver Incurred OH Allocated Cost Driver Incurred OH Allocated Customer Service                                256.00 per bids                             59 service request                            15,104               49 service request              12,544                191 service request                  48,896 Project Bidding                                611.00 per design change                             35 bids                            21,385               18 bids              10,998                   48 bids                  29,328 Engineering Support                                406.00 per service request                             49 design changes                            19,894               28 design changes              11,368                134 design changes                  54,404 Total Overhead Cost                            56,383              34,910                132,628 Answer 3. Cold Zone Mechanical Inc. Customer Profitability Report Good Knowledge University Hot Shotz Arena Break-a-leg Hospital Unit Volume                                        20                                      14                               6 Sales Revenue                          1,550,000                        1,085,000                  465,000 Less: Cost of Goods Sold                          1,194,000                           835,800                  358,200 Gross Profit                             356,000                           249,200                  106,800 Less: Selling & Administrative Exp. Customer Service                                15,104                              12,544                    48,896 Project Bidding                                21,385                              10,998                    29,328 Engineering Support                                19,894                              11,368                    54,404 Total Selling & Admn. Exp.                                56,383                              34,910                  132,628 Net Operating Income                             299,617                           214,290                  (25,828)

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