Bethilda's Brooms manufactures brooms which it sells to merchandising firms such as Quality Quidditch Supplies (QQS), Brooms 'R Us (BRU), Broom-Mart (BM), Broom City (BC), Best Brooms (BB), and Clean Sweep (CS).

The list price of a broom is $48, and the full manufacturing costs are $28.

Salespeople receive a commission on sales; the commission of $30 per order is based on number of orders taken and paid in addition to regular salary. Bethilda's Brooms makes products based on anticipated demand; however, Bethilda carries an inventory of brooms, so rush orders do not result in any extra manufacturing costs over and above the $28 per broom.

Bethilda's Brooms ships finished product to the customer at no additional charge to the customer for either regular or expedited delivery. Bethilda incurs significantly higher costs for expedited deliveries than for regular deliveries. Expected and actual customer-level cost driver rates are provided.

Because salespeople are paid $30 per order, they break up large orders into multiple smaller orders. This practice reduces the actual order-taking cost by $18 per smaller order (from $30 per order to $12 per

order) because the smaller orders are all written at the same time. This lower cost rate is not included in budgeted rates because salespeople create smaller orders without telling management or the accounting department. Also,salespeopleoffercustomersdiscountstoenticethemtoplacemoreorders;Brooms'R Us and Broom-Mart each receive a 10% discount off the list price of $48.

1. Calculate the expected customer-level operating income for the six customers. Use the number ofwritten orders at $30 each to calculate expected order costs.
2. Recalculate the customer-level operating income using the number of written orders but at their actual $12 cost per order instead of $30 (except for Brooms 'R Us, whose actual cost is $30 perorder). What will Bethilda's assessment of customer-level (and salespeople) performance be for this period? (ie. Did they perform better or worse than expected?)
3. Recalculate the customer-level operating income if salespeople had not broken up actual orders into multiple smaller orders. Don't forget to also adjust sales commissions.
4. How is the behaviour of the salespeople affecting the profit of Belinda's Brooms? Is their behaviour ethical? What can Bethilda do to change their behaviour?