Rod Manufacturing Company produces metal rods for their customers. Its wholesale division is the focus of our analysis. Management of the company wishes to analyze the profitability of the three key customers in the division and has gathered the following information.

The company allocates wholesale channel costs to customers based on one cost pool and division costs based on two cost pools as follows. Customer actions do not influence these costs.

Required
1. Calculate customer profitability as a percentage of revenue after assigning customer-level costs, distribution-channel costs, and division costs. Comment on your results.
2. What are the advantages and disadvantages of Rod Manufacturing allocating wholesale-channel and division costs tocustomers?

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CustomerA Customer B Customer C Other Customers Division 480,3325,290,000 266,058 3,411,000 Revenue 054 826 1,544,680 2,210,162 Customer-level cots 675,378 951,669 1,517.895 379,448 35.973% Customer-level operating 692,267 214274 1,879,000 income Customer-level operating income percentage 38.391% 31.322% 44.610% 35.5% Total $740,000 Allocation basis Wholesale-channel cost pool Division costs Customer-level operating income Marketing costs Administration costs 50,000 Custmerevenue $20,000 Customer-level costs