HajjarTech

has only two retail and two wholesale customers. Information relating to each customer for

2020

follows (in thousands):

LOADING...

(Click

the icon to view the data.)

HajjarTech's

annual distribution-channel costs are

$39

million for wholesale customers and

$10

million for retail customers. The company's annual corporate-sustaining costs, such as salary for top management and general-administration costs, are

$61

million. There is no cause-and-effect or benefits-received relationship between any cost-allocation base and corporate-sustaining costs. That is,

HajjarTech

could save corporate-sustaining costs only if the company completely shuts down.

Hajjar - 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.) Hajjar - Tech's annual distribution-channel costs are $39 million for wholesale customers and \$10 million for retail customers. The company's annual corporate-sustaining costs, such as salary for top management and general-administration costs, are \$61 million. There is no cause-and-effect or benefits-received relationship between any cost-allocation base and corporate-sustaining costs. That is, Hajjar - Tech could save corporate-sustaining costs only if the company completely shuts down. 1. Calculate customer-level operating income. 2. Prepare a customer-cost hierarchy report. 3. Hajjar - Tech's management decides to allocate all corporate-sustaining costs to distribution channels: $54 million to the wholesale channel and $7 million to the retail channel. As a result, distribution channel costs are now $93 million ( $39 million +$54 million) for the wholesale channel and $17 million ( $10 million +$7 million) for the retail channel. Calculate the distribution-channel-level operating income. On the basis of these calculations, what actions, if any, should Hajjar - Tech's managers take? Explain. 4. How might Hajjar - Tech use the new cost information from its activity-based costing system to better manage its business