A Dance Studio sells all types of items for dancing.

Some items are inexpensive ribbons, while some are expensive, made-to-order dresses. Some items are sold to individuals while others are bought in large quantities by dance companies. The manager does not understand why many of those long-term customers are finding other suppliers.

The company uses a conventional costing system and maintains only a single overhead allocation basis for all types of customers and all products are assumed to share same amount of time and effort.

Required: Explain why so many long-time customers are finding other suppliers and what changes to the costing system might be useful to avoid losing further customers.