Casamia plc purchases a range of good quality gift and household products from around the world; it then sells these products through 'mail order' or retail outlets. The company receives 'mail orders' by post, telephone and Internet. Retail outlets are either department stores or Casamia plc's own small shops. The company started to set up its own shops after a recession in the early 1990s and regards them as the flagship of its business; sales revenue has gradually built up over the last 10 years. There are now 50 department stores and 10 shops.

The company has made good profits over the last few years but recently trading has been difficult. As a consequence, the management team has decided that a fundamental reappraisal of the business is now necessary if the company is to continue trading.

Meanwhile, the budgeting process for the coming year is proceeding. Casamia uses an activity-based costing (ABC) system and estimated cost information for the coming year is available in the attached appendices.

Task: Report

You receive the following email from the Financial Controller:

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From: Clara Fuchs (Financial Controller) Sent: 03 June, 10.23 a.m. To: Senior Management Accountant Subject: Activity-Based Costing Thank you for your calculations on the expected profitability of the different types of sales outlets, for the coming year. I intend to submit these to the board. I would welcome some comments on the results of the figures you have prepared, particularly in the context of the re-appraisal of the business. Please also advise on how the information you have submitted may be revised or expanded to be of more assistance, and suggest what other information is needed to make a more informed judgement.