Case 4: Bethilda's Brooms 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. Cost Driver Rate Activity Order taking (excluding sales commission) Product handling Delivery Expedited (rush) delivery $30 per order $1.90 per unit $2 per km driven $320 per shipment Information about Bethilda's clients during 2019 is as follows: QQS BRU BM BM BCBBCS Total number of units purchased 270 580 400 140 460 1,500 Number of actual orders . 3 17 3 3 6 Number of written orders per actual order 3 2* 4 3 6 3 Total number of km driven to deliver all products C 80 134 72 46 316 120 Number of expedited deliveries *Because BRU places 17 separate orders, its order costs are $30 per order. All other orders are multiple smaller orders and so have actual order costs of $12 each. 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, salespeople offer customers discounts to entice them to place more orders; Brooms 'R Us and Broom-Mart each receive a 10% discount off the list price of $48. Case 4: Bethilda's Brooms (18 marks) Calculate the expected customer-level operating income for the six customers. Use the number of written orders at $30 each to calculate expected order costs. (6 marks) 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 per order). What will Bethilda's assessment of customer-level (and salespeople) performance be for this period? (ie. Did they perform better or worse than expected?) (6 marks) 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. (3 marks) 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? (3 marks) *hint* this question requires you to take the same information making only minor adjustments. Read the full question first, then plan for your response Case 4: Bethilda's Brooms 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. Cost Driver Rate Activity Order taking (excluding sales commission) Product handling Delivery Expedited (rush) delivery $30 per order $1.90 per unit $2 per km driven $320 per shipment Information about Bethilda's clients during 2019 is as follows: QQS BRU BM BM BCBBCS Total number of units purchased 270 580 400 140 460 1,500 Number of actual orders . 3 17 3 3 6 Number of written orders per actual order 3 2* 4 3 6 3 Total number of km driven to deliver all products C 80 134 72 46 316 120 Number of expedited deliveries *Because BRU places 17 separate orders, its order costs are $30 per order. All other orders are multiple smaller orders and so have actual order costs of $12 each. 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, salespeople offer customers discounts to entice them to place more orders; Brooms 'R Us and Broom-Mart each receive a 10% discount off the list price of $48. Case 4: Bethilda's Brooms (18 marks) Calculate the expected customer-level operating income for the six customers. Use the number of written orders at $30 each to calculate expected order costs. (6 marks) 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 per order). What will Bethilda's assessment of customer-level (and salespeople) performance be for this period? (ie. Did they perform better or worse than expected?) (6 marks) 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. (3 marks) 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? (3 marks) *hint* this question requires you to take the same information making only minor adjustments. Read the full question first, then plan for your response