Cold Zone Mechancial Inc. manufactures cooling units for commercial buildings. T
ID: 2578496 • Letter: C
Question
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:
1
Price per unit
$77,500.00
2
Cost of goods sold
59,700.00
3
Gross profit per unit
$17,800.00
Explanation / Answer
Note: Please confirm the Labels and Amount Descriptions for the exact wording for the text entries since the same has not been provided with the question.
1 Activity Budgeted Activity Cost $ Activity-base usage Activity Rate $ Customer service 76544 299 256 per service request Project bidding 61711 101 611 per bid Engineering support 85666 211 406 per design change Total costs $ 223921