Underwood Company produces sofas for 20 retail outlets. Of the 20 retail outlets, 19 are small, separately owned furniture stores and one is a retail chain. The retail chain buys 60 percent of the sofas produced. The 19 smaller customers purchase sofas in approximately equal quantities, where the orders are about the same size. Data concerning Underwood's customer activity are as follows:

Currently, customer-driven costs are assigned to customers based on units sold, a unit level driver.

Required:
Assign costs to customers by using an ABCapproach.

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Large Retailer Smaller Retailers Units purchased Orders placed Number of sales calls Manufacturing costs Order filling costs allocated Sales force costs allocated 16,000 800 196 24,000 4 $14,400,000 $484,800 $240,000 $9,600,000 $323,200 $160,000 Allocated based on sales volume