Assignment Questions Mindanao, Inc., a distributor of pharmaceutical products, operates at capacity and has three main market segments: i. General supermarket chains ii. Drugstore chains iii. Mo-and-pop single-store pharmacies. Mindanno, 2021 For many years, Mindanao has used gross margin pereentage to evaluate the relative profitability of its market segments. But John recently attended a seminar on activity-based costing and is considering using it at Mindanao to analyse and allocate "other operating costs". He meets with all the key managers and several of his operations and sales staff, and they agree that there are five key activities that drive other operating costs at Mindanao. rach customer order consists of one or more line items. A line item represents a single product (such) as Extra-Strength Tylenol Tablets). Each product line item is delivered in one or more senarate (such cartons. Each store delivery For many years, Mindanao has used gross margin percentage to evaluate the relative profitability of its market segments. But John recently attended a seminar on activity-based costing and is considering using it at Mindanao to analyse and allocate "other operating costs". He meets with all the key managers and several of his operations and sales staff, and they agree that there are five key activities that drive other operating costs at Mindanao. Each customer order consists of one or more line items. A line item represents a single product (such as Extra-Strength Tylenol Tablets). Each product line item is delivered in one or more separate cartons. Each store delivery entails the delivery of one or more cartons of products to a customer. Mindanno's staff stacks cartons directly onto display shelves in customers' stores. Currently, there is no additional charge to the customer for shelf stocking and not all customers use Mindanao for this activity. The level of each activity in the three market segments and the total cost incurred for each activity in 2021 is as follows: Required: a. Undertake a review of literature referring to at least 4 journal articles to discuss management's involvement and decisions in Activity-Based Costing. b. Discuss how Activity-Based Costing is distinguished from other costing systems. c. Calculate the 2021 gross margin percentage for each of Mindanao's three market segments. d. Compute the cost driver rates for each of the five activity areas. e. Use the activity-based costing information to allocate the $313,075 of "other operating costs" to each of the market segments. Compute the operating income for each market segment. f. Analyse and comment on the results, comparing profitability in (c) and (c) above. What new insights are available with the activity-based costing information
