Customer Distribution Channels (all amounts in thousands of U.S. Dollars) Wholesale Customers Retail Customers Total Total N. America S. America Total Wholesale Wholesaler Wholesaler Retail Green Global Energy Power Revenues at actual prices 2588 Customer-level costs 100000085 88888865 $ 12956 $ 1000040 655583,885 $$145 $ Customer-level operating income 44488000 Distribution-channel costs $1111185 $ 444470 Distribution-channel-level oper. inc. Corporate-sustaining costs Operating income 667700 Requirement 3. Hanson Tech's management decides to allocate all corporate-sustaining costs to distribution channels. Calculate the distribution-channel-level operating income. On the basis of these calculations, what actions, if any, should Hanson - Tech's managers take? Explain. (Enter amounts in thousands.) If corporate costs are allocated to the channels, the retail channel will show an operating and the wholesale channel will show an operating will not change from the amount in requirement 2 profit of profit of (in thousands), $46465 (in thousands). The overall operating profit On the basis of the calculations above, what actions, if any, should Hanson Tech's managers take? Explain. There is no cause-and-effect or benefits-received relationship between corporate costs and any allocation base. Therefore, the management of Hanson - Tech Electronics should not base any performance evaluations or investment/disinvestment decisions based on these channel-level operating income numbers. Requirement 4. How might Hanson Tech use the new cost information from its activity-based costing system to better manage its business? Hanson - Tech could use activity-based cost information to better manage its business by evaluating the customer level costs and determining which activities are providing a value to the customer that they are willing to pay for. If costs of sales visits for the North America Wholesaler are $5,900, which is greater than the cost for the South America Wholesaler, Hanson - Tech should evaluate the efficiency and effectiveness of this activity for this customer group. Burtman - Tech has only two retail and two wholesale customers. Information relating to each customer for 2020 follows (in thousands): (Click the icon to view the data.) Burtman - Tech's annual distribution-channel costs are $34 million for wholesale customers and $7 million for retail customers. The company's annual corporate-sustaining costs, such as salary for top management and general-administration costs, are $67 million. There is no cause-and-effect or benefits-received relationship between any cost-allocation base and corporate-sustaining costs. That is, Burtman - Tech could save corporate-sustaining costs only if the company completely shuts down. Read the requirements. Data table - Wholesale Customers North America Wholesaler South America Wholesaler Retail Customers Green Energy Global Power Revenues at list prices 420,000 $ 590,000 $ 150,000 $ 120,000 Discounts from list prices 25,000 43,000 7,800 540 Cost of goods sold 320,000 465,000 118,000 84,000 Delivery costs 400 630 160 130 Order processing costs 725 1,040 175 115 Cost of sales visit 5,600 5,500 2,000 1,350 Print Done ... Requirements - 1. Calculate customer-level operating income. 2. Prepare a customer-cost hierarchy report. 3. Burtman - Tech's management decides to allocate all corporate-sustaining costs to distribution channels: $45 million to the wholesale channel and $22 million to the retail channel. As a result, distribution channel costs are now $79 million ($34 million + $45 million) for the wholesale channel and $29 million ($7 million + $22 million) for the retail channel. Calculate the distribution-channel-level operating income. On the basis of these calculations, what actions, if any, should Burtman Tech's managers take? Explain. - 4. How might Burtman Tech use the new cost information from its activity-based costing system to better manage its business? Print Done Requirement 1. Calculate customer-level operating income. Begin by calculating each customer's gross margin. Then calculate the operating income for each customer. (Enter amounts in thousands.) All amounts in thousands of U.S. Dollars Revenues at list price Price discounts Revenues at actual prices Cost of goods sold Gross margin Customer-level operating costs: Order processing Delivery Sales visits Total cust-level oper. costs Customer-level operating income Wholesale Retail North America South America Green Global Wholesaler Wholesaler Energyyyyy nergy Power 444444 42200 555560000 33333 36666000 86600000 EA 98850 $1900 5300000 1111888 104,400 $ 143335 $