Laraib Distributions have been accused of discriminating against its small-order customers (25 to 50 cases) in southern territory when compared with same class of customers in other territory. The company has classified its marketing costs by territories. It now plans to allocate the territorial costs to different categories of customers within each territory.

Tabulation of the average distribution costs per year in southern territory shows:

Advertising;

Direct to customersRs.36,000

Radio and newspapers90,000

Sales salaries360,000

Sales commission480,000

Delivery288,000

Sales travel cost108,000

Collection cost84,000

Rs.1446,000

The sales department has furnished the following data to assist prorating costs in southern territory between small, medium and large order customers.

Small order customers

Medium order customers

Large order customers

Net sales (Rs.)

Number of sales order taken

Number of cases of product sold

Relative shipping cost (per order) (Rs.)

Number of customers

Relative number of kilometers

Travelled (per day per salespersons)

Number of salespersons

1500,000

2,500

1,000,000

10

1,500

4

13

2,220,000

2,000

1,500,000

20

1,500

10

6

3,500,000

1,500

2,500,000

30

2,000

16

5

In the collection department, the bookkeeping cost per order handled is about one rupee. Each customer is mailed a statement at month end. The customers make single month remittances on account.

All salespersons are paid the same salary and each salesperson works with a single class of customer.

Required:

Prepare a statement showing allocation of the distribution costs of southern territory to the three classes of customers. Indicate the base or bases on which each allocation is made. (Round off all computations suitably).