Enviro-Tech has only two retail and two wholesale customers. Information relating to each customer for 2013 follows (in thousands):

Enviro-Tech’s annual distribution-channel costs are $ 33 million for wholesale customers and $ 12 million for retail customers. The company’s annual corporate-sustaining costs, such as salary for top management and general-administration costs, are $ 48 million. There is no cause-and-effect or benefits-received relation-ship between any cost-allocation base and corporate-sustaining costs. That is, Enviro-Tech could save corporate-sustaining costs only if the company completely shuts down.

Required
1. Calculate customer-level operating income using the format in Exhibit 14-3.
2. Prepare a customer-cost hierarchy report, using the format in Exhibit 14-6.
3. Enviro-Tech’s management decides to allocate all corporate-sustaining costs to distribution chan-nels: $ 38 million to the wholesale channel and $ 10 million to the retail channel. As a result, distribution channel costs are now $ 71 million ($ 33 million + $ 38 million) for the wholesale channel and $ 22 million ($ 12 million + $ 10 million) for the retail channel. Calculate the distribution channel–level operating income. On the basis of these calculations, what actions, if any, should Enviro-Tech’s managers take? Explain.
4. How might Enviro-Tech use the new cost information from its activity- based costing system to better manage itsbusiness?

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Wholesale Customers Retail Customers North America Wholesaler $375,000 25,800 285,000 4,550 3,820 6,300 South America Wholesaler Green Energy Global Power Revenues at list prices Discounts from list prices Cost of goods sold Delivery costs Order processing costs Cost of sales visit $130,000 590 95,000 2,145 1,130 1575 S590,000 175,000 47,200 510,000 6,710 5,980 2,620 8,400 144,000 2,230 2,180 2620