E7-18 (book/static) Is Question Help Enviro - Tech has only two retail and two wholesale customers. Information relating to each customer for 2012 follows (in thousands): (Click to view the information.) Requirements 1. Calculate customer-level operating income. 2. Prepare a customer-cost hierarchy report. 3. Enviro - Tech's management decides to allocate all corporate-sustaining costs to distribution channels. 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 its business? Requirement 1. Calculate customer-level operating income. Begin by calculating each customer's gross margin. Then calculate the operating income for each customer. All amounts in thousands of U.S. Dollars Retail Wholesale North America South America Wholesaler Wholesaler Green Global Energy Power Revenues at list price Price discounts Revenues Cost of goods sold Wholesale Customers Retail Customers North America South America Green Global Power Energy 175,000 $ Revenue at list prices Discounts from list prices 8,400 Cost of goods sold Wholesaler 375,000 $ 25,800 285,000 4,550 3,820 6,300 Wholesaler 590,000 $ 47,200 510,000 6,710 5,980 2,620 144,000 130,000 590 95,000 2,145 1,130 1,575 2,23 Delivery costs Order processing costs Cost of sales visit 2,180 2,620 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 relationship 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