Customer profitability, customer-cost hierarchy Ramish Electronics has only two retail and two wholesale customers. Information relating to

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Customer profitability, customer-cost hierarchy Ramish Electronics has only two retail and two wholesale customers. Information relating to each customer for 2009 follows (in thousands):

Wholesale Customers North America South America Big Sam Wholesaler $580,000 Retail Customers World Market Wholesaler Ste

Ramish’s annual distribution-channel costs are $38 million for wholesale customers and $7 million for retail customers. Its annual corporate-sustaining costs, such as salary for top management and general administration costs, are $65 million. There is no cause-and-effect or benefits-received relationship between any cost-allocation base and corporate-sustaining costs. That is, corporate-sustaining costs could be saved only if Ramish Electronics were to completely shut down.

1. Calculate customer-level operating income using the format in Exhibit 14-5.

2. Prepare a customer-cost hierarchy report, using the format in Exhibit 14-6.

3. Ramish’s management decides to allocate all corporate-sustaining costs to distribution channels: $51 million to the wholesale channel and $14 million to the retail channel. As a result distribution channel costs are now $89 million ($38 million + $51 million) for the wholesale channel and $21 million ($7 million + $14 million for the retail channel. Calculate the distribution-channel-level operating income. On the basis of these calculations, what actions, if any, should Ramish’s managers take? Explain.

Distribution
The word "distribution" has several meanings in the financial world, most of them pertaining to the payment of assets from a fund, account, or individual security to an investor or beneficiary. Retirement account distributions are among the most...
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Cost Accounting A Managerial Emphasis

ISBN: 978-0136126638

13th Edition

Authors: Charles T. Horngren, Srikant M.Dater, George Foster, Madhav

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