Question 2: Customer profitability analysis and activity analysis (20 marks)

Part C: Activity-based management

Keto Heaven's Finance division collected the following information relating to supporting costs to customers of Meal Box Division, sales to each customer, and production costs.

Activities	Cost drivers	Activity costs	Number of cost drivers
Healthy Supermarket	Asian Supermarket	Sunny Grocery
Sales order processing	Number of orders	$4,500	10	20	4
Sales return processing	Number of returns	$3,200	3	2	1
Shipping	Number of shipments	$2,500	18	24	6
Customer complaint	Number of calls	$4,300	6	6	1
Sales and production cost information	Healthy Supermarket	Asian Supermarket	Sunny Grocery
Activities	Unit
Sales volume	Number of meals	10,000	4,000	400
Selling Price	$/meal	$7	$8	$9
Production costs	$/meal	$4	$4	$4

Required:

2a. Use the information provided in Part C and conduct the customer profitability analysis for three customers of the Meal Box Division using the activity-based costing (ABC) approach. (10 marks)

2b. Based on the above customer profitability analysis, identify two non-value-added costs, and explain how they affect the profit of the Meal Box Division. (3 + 3 = 6 marks)

2c. Analyse the production process (given in Part B) to identify the root causes of the two non-value-added costs identified in requirement 2b. (2 x 2 = 4 marks)

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