Question
Help with all requirements - Cost accounting Hamish Tech has only two retail and two wholesale customers. Information relating to each customer for 2020 follows
Help with all requirements Cost accounting
Hamish 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.) Hamish Tech's annual distribution-channel costs are $35 million for wholesale customers and $6 million for retail customers. The company's annual corporate-sustaining costs, such as salary for top management and general-administration costs, are $62 million. There is no cause-and-effect or benefits-received relationship between any cost-allocation base and corporate-sustaining costs. That is, Hamish Tech could save corporate-sustaining costs only if the company completely shuts down. Read the requirements. 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 Data table Revenues at list prices Discounts from list prices Cost of goods sold Delivery costs Order processing costs Cost of sales visit Requirements Wholesale Customers Retail Customers North America Wholesaler 430,000 $ 35,000 360,000 460 800 5,900 South America Wholesaler 600,000 $ 45,000 485,000 680 1 ,030 5,800 Green Energy Global Power 155,000 $ 125,000 Wholesale North America Wholesaler Gross margin South America Wholesaler Retail Green Energy Global Power 7 ,ooo 118,000 170 245 2,300 500 82,000 115 145 1,100 1. 2. 3. 4. Calculate customer-level operating income. Prepare a customer-cost hierarchy report. Hamish Tech's management decides to allocate all corporate-sustaining costs to distribution channels: $51 million to the wholesale channel and $11 million to the retail channel. As a result, distribution channel costs are now $86 million ($35 million + $51 million) for the wholesale channel and $17 million ($6 million + $1 1 million) for the retail channel. Calculate the distribution-channel-level operating income. On the basis of these calculations, what actions, if any, should Hamish Tech's managers take? Explain. How might Hamish Tech use the new cost information from its activity-based costing system to better mana e its business?
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