Master mind has only two retail and two wholesale customers. Information relating to each customer for 2021 follows (in thousands):

	Customers- wholesale		Customer- Retail
	Manama whole salers	Riffa whole salers	oasis mall	Seef mall
Revenues at list prices	$400,000	$615,000	$200,000	$155,000
discounts from list prices	50,800	72200	33400	25590
cost of goods sold	310,000	535,000	169000	120,000
delivery cost	6550	8710	4230	4145
order processing costs	5820	7980	4180	2130
cost of sales visit	8300	4620	4620	2575

Master minds annual distribution-channel costs are $35 million for wholesale customers and $14 million for retail customers. The company’s annual corporate-sustaining costs, such as salary for top management and general-administration costs are $50million. There is no cause-and-effect or benefits-received relationship between any cost-allocation base and corporate-sustaining costs. That is, master mind could save corporate-sustaining costs only if the company completely shuts down.

Required:

1. Calculate customer-level operating income

2. Prepare a customer-cost hierarchy report,

3. Master mind management decides to allocate all corporate-sustaining costs to distribution channels: $40 million to the wholesale channel and $12 million to the retail channel. As a result, distribution channel costs are now $75 million ($35 million + $40 million) for the wholesale channel and $26 million 1$14 million + $12 million) for the retail channel. Calculate the distribution-channel-level operating income. On the basis of these calculations, what actions, if any, should Master minds managers take? Explain.

4. How might master mind use the new cost information from its activity-based costing system to better manage its business?

Answer rating: 100% (QA)

2 3 Revenues at list price Less Price discounts Revenues at actual price Cost of goods sold Gross ma... View the full answer