Construct and interpret a Product Profitability Report, Allocating Selling and Administrative Expenses Naper Inc, manufactures power equipment. Naper has two primary products-generators and air compressors. The following roport was prepared by the controller for Naper's senior marketing management for the year ended December 31 : The marketing management team was concerned that the selling and administrative expenses were not troced to the products. Marketing management believed that some products consumed larger amounts of selling and administrative expense than did other products. To verity this, the controller was asked to prepare a complete product proftability report, using activity-based costing. The controller determined that selling and administrative expenses consisted of two activities: sales order processing and post-sale customer service. The controller was able to determine the activity base and activity rate for each activity, as follows:The controller determined the following activity-base usage information about each product: a. Determine the activity cost of each product for sales order processing and post-sale customer service activities. b. Use the information in (a) to prepare a complete product profitability report dated for the year ended December 31 . Calculate the gross profit to sales and the income from operations to sales percentages for each product. Round percentages to two decimal places. Enter all amounts as positive numbers.c. Interpret the product profitability report. The air compressors have the income from operations to sales percentage because the product is a user of Naper's sales and service activities, Many factors cause the air compressors to have Income from operations as a percent of sales than generators..

1. Construct and interpret a Product Profitability Report, Allocating Selling and Administrative
Expenses Naper Inc, manufactures power equipment. Naper has two primary products-generators
and air compressors. The following roport was prepared by the controller for Naper's senior
marketing management for the year ended December 31 : The marketing management team was
concerned that the selling and administrative expenses were not troced to the products. Marketing
management believed that some products consumed larger amounts of selling and administrative
expense than did other products. To verity this, the controller was asked to prepare a complete
product proftability report, using activity-based costing. The controller determined that selling and
administrative expenses consisted of two activities: sales order processing and post-sale customer
service. The controller was able to determine the activity base and activity rate for each activity, as
follows:The controller determined the following activity-base usage information about each
product: a. Determine the activity cost of each product for sales order processing and post-sale
customer service activities. b. Use the information in (a) to prepare a complete product profitability
report dated for the year ended December 31 . Calculate the gross profit to sales and the income
from operations to sales percentages for each product. Round percentages to two decimal places.
Enter all amounts as positive numbers.c. Interpret the product profitability report. The air
compressors have the income from operations to sales percentage because the product is a user
of Naper's sales and service activities, Many factors cause the air compressors to have Income
from operations as a percent of sales than generators.