1) Discuss Carolina Creations' practice of setting selling prices by applying a standard markup to the cost of goods sold.

a. When is it appropriate to apply different markups to different customers or purchases?

2) The reason for identifying the operating expenses with customers was not clear to Edward and Robin. What is the rationale for this practice?

3) What issues should Daniel and Robin consider when determining how to identify the operating expenses with customers? What additional information would be useful in making the identifications?

4) Can any of the operating expenses be directly related to individual customers in whole or in part, and why should that be done?

a. Are there any operating expenses that should not be allocated to customers but should be treated as common costs instead?

5) What cost drivers would you recommend for each of the customer-servicing activities Robin identified, and why would each be appropriate?

6) Use the information provided by your instructor to calculate driver rates, and allocate the operating expenses to customers.

7)Prepare common-size financial statements for the three customers. What do they reveal? Common-size financial statements are statements express in percentages of dollars. The amounts on a common-size income statement are express as a percentage of sales.

8) Devise ratios that you believe would help evaluate customers, describe your reasoning behind the ratios, and indicate what insights they provide about the customers.

9) What actions would you recommend Carolina Creations' Marketing department take with respect to each of the customers?