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Maratab Itd manufactures electronic devices, including PDAS, MP3 and MP4 players, for home and Selling $39 000 3 83,750 $ 9 000 business use. Three years ago, it implemented an activity-based costing (ABC) system. Both the Customer support 78 300 123 750 20 200 management accountants and the manufacturing managers are very pleased with the results, as they now have accurate product costing information that they can use for a variety of decisions. Selling price per unit 2 000 2 600 2 800 However, the ABC system focuses only on product design and manufacturing costs. The activity- based costs of Waratah's major products are as follows: The company's customers can be analysed into three main groups: educational institutions, business and home entertainment. The sales to these groups during the June quarter are detailed below: Activity PDA Basic PDA+ PDA/Phone Customer groups PDA basic PDA+ PDA/phone Designing $100 $110 $125 Educational institutions 150 40 5 Purchasing $150 $95 $130 Business 20 30 30 Assembling $890 $1200 $1400 Home entertainment 130 80 5 Finishing $260 $250 5250 Total sales 300 150 40 Total Activity Cost $1400 $1655 $1905 In July, Hannah Allen, the assistant accountant, noticed that over the last six months the spending in The costs of customer support and selling activities for each customer group are as both the customer support department and the sales department had been steadily increasing. The follows: previous month's costs had been 20 per cent above budget! The customer support supervisor, Bill Dominico, is able to explain exactly why this is happening. He has had to employ new staff, there is Educational Business Home entertainment more overtime being worked, and some of the service calls have been outsourced to a third-party Selling expenses $28 000 $25 750 $28 000 maintenance company. But all this was necessary, as he explains: Customer support 86 000 49 750 86 500 If a customer has a problem, we have to fix it! And if we have spent more than our budget, then that is just too bad. It is important to keep customers happy. Why, only the other day the Required: managing director was telling us how important our customers are and how customer 1. Construct two Excel spreadsheets to calculate: satisfaction is critical to the company's success. (a) profitability of each product line Hannah asks Bill if she can have access to the records of his department for the past three months (b) profitability of each customer group. (June quarter). She intends to analyse the service calls to see exactly where the extra money is being 2. What can you conclude from your analysis in requirement 1? spent. She also plans to analyse the selling expenses that have occurred during June quarter. The 3. Would you recommend dropping the loss-making products or customers? Explain your answer. analysis reveals the following data: 4. Use your spreadsheet to answer the following questions: (a) If the selling price of the PDA basic decreased to $1 600 and customer support for the PDA+ The cost of selling and customer support activities, and selling price for each product, are as was reduced to $80 000, which product would be the most profitable? follows: (b) If sales of the PDA/phone to business customers increased to 40 and the selling price of the PDA/ phone was increased to $3 200, which customer group would be the most profitable? 5. Explain the types of performance measures that could be introduced by Waratah to assist in understanding and managing its customers. Activate Windows