PR 18-3A Activity-based and department rate product costing and Obj. 3,4 product cost distortions Black and Blue Sports Inc, manufactures two products: snowboards and skis. The factory over- head incurred is as follows: Indirect labor $507,000 Cutting Department 156,000 Finishing Department 192,000 Total $855,000 Activity-Based Costing and Customer Profitability Schneider Electric manufactures power distribution equipment for commercial customers, such as hospitals costing was used to determine customer profitability. Customer service activities were assigned to individu customer service activities, activity base, and activity rate: Customer Service Activity Activity Base Activity Rate Bid preparation Shipment Support standard items Support nonstandard items Number of bid requests Number of shipments Number of standard items ordered Number of nonstandard items ordered $400 per request $ 80 per shipment $ 25 per std. item $150 per nonstd. item Assume that the company had the following gross profit information for three representative customers: Customer Customer Customer 2 Revenues $120,000 $160,000 Cost of goods sold 76,800 $200,000 110,000 $90,000 83,200 Gross profit $43,200 $76,800 Gross profit as a percent of sales 36% 45% 48% The administrative recorde indicated that the activity.hace vano nuantities for each customer were PR 18-3A Activity-based and department rate product costing and Obj. 3,4 product cost distortions Black and Blue Sports Inc, manufactures two products: snowboards and skis. The factory over- head incurred is as follows: Indirect labor $507,000 Cutting Department 156,000 Finishing Department 192,000 Total $855,000 Activity-Based Costing and Customer Profitability Schneider Electric manufactures power distribution equipment for commercial customers, such as hospitals costing was used to determine customer profitability. Customer service activities were assigned to individu customer service activities, activity base, and activity rate: Customer Service Activity Activity Base Activity Rate Bid preparation Shipment Support standard items Support nonstandard items Number of bid requests Number of shipments Number of standard items ordered Number of nonstandard items ordered $400 per request $ 80 per shipment $ 25 per std. item $150 per nonstd. item Assume that the company had the following gross profit information for three representative customers: Customer Customer Customer 2 Revenues $120,000 $160,000 Cost of goods sold 76,800 $200,000 110,000 $90,000 83,200 Gross profit $43,200 $76,800 Gross profit as a percent of sales 36% 45% 48% The administrative recorde indicated that the activity.hace vano nuantities for each customer were