Fairway Golf Corporation produces private label golf clubs for pro shops throughout North America. The company uses activity-based costing to evaluate the profitability of serving its customers. This analysis is based on categorizing the company’s costs as follows, using the ease of adjustment color coding scheme described in Appendix 8A:

Management would like to evaluate the profitability of a particular customer—Shaker Run Golf Club of Lebanon, Ohio. Over the last twelve months this customer submitted one order for 100 golf clubs that had to be produced in four batches due to differences in product labeling requested by the customer. Summary data concerning the order appear below:

A cost analyst working in the controller’s office at the company has already produced the action analysis cost matrix for the Shaker Run Golf Club that appears below:

Required:

Prepare an action analysis report showing the profitability of the Shaker Run Golf Club. Include direct materials and direct labor costs in the report. Use Exhibit 8A—5 as a guide for organizing the report.

Transcribed Image Text:

Ease of Adjustment Code Direct materials Green Direct labor Yellow Indirect labor Yellow Red Factory equipment depreciation Factory administration Red Red Selling and administrative wages and salaries Selling and administrative depreciation Red Marketing expenses Yellow