The Tempting Cheesecake Company supplies cheesecakes to three large supermarket chains throughout Australia. Management has become concerned about the rising costs associated with the processing and dispatch of orders. An activity analysis of the indirect costs identified the following customer-related costs.

*Expressed in units of measure of the driver.
Sales are marked up 50 per cent on cost.
Required:
a. Calculate the gross profit for each customer.
b. Calculate the activity cost rate for each activity.
c. Assign the activity costs to each of the three customers.
d. Calculate the contribution for each customer if the sales pattern for each is as follows: Customer 1 - $500 000; Customer 2 - $250 000; Customer 3 - $300 000.
e. Discuss the difference between the analysis in part a. and part d..
f. Advise the management of the Tempting Cheesecake Company as to whether any changes should be made in its relationships with customers.

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Use of cost driverSupermarket customer Activitv Cost cost pool Estimated Total indirect expected costs driver use of cost driver Orders Nmber of $200 000 processing orders Retuns Number of $50000 processmg retums Delivery Number of $100 000 450 300 100 50 100 50 25 25 700 400 200 100 Rush orders Sales visits deliveries Number of 70 000 rush orders Number of $20000 visits 50 10 20 20 100 50 25 25