Ossen - 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.) Ossen - Tech's annual distribution-channel costs are $40 million for wholesale customers and $8 million for retail customers. The company's annual corporate-sustaining costs, such as salary for top management and general-administration costs, are $68 million. There is no cause-and-effect or benefits-received relationship between any cost-allocation base and corporate-sustaining costs. That is, Ossen - Tech could save corporate-sustaining costs only if the company completely shuts down. Read the requirements. Wholesale Customers North America South America Retail Customers Wholesaler Wholesaler Green Energy Global Power Revenues at list prices Discounts from list prices $ 425,000 $ 600,000 $ 140,000 $ 95,000 37,000 43,000 7,600 470 Cost of goods sold 320,000 455,000 117,000 86,000 Delivery costs 500 660 160 125 Order processing costs 750 1,010 185 145 Cost of sales visit 5,900 5,100 2,100 1,550 1. Calculate customer-level operating income. 2. Prepare a customer-cost hierarchy report. 3. Ossen - Tech's management decides to allocate all corporate-sustaining costs to distribution channels: $45 million to the wholesale channel and $23 million to the retail channel. As a result, distribution channel costs are now $85 million ($40 million+ $45 million) for the wholesale channel and $31 million ($8 million+ $23 million) for the retail channel. Calculate the distribution-channel-level operating income. On the basis of these calculations, what actions, if any, should Ossen - Tech's managers take? Explain. 4. How might Ossen - Tech use the new cost information from its activity-based costing system to better manage its business? 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 Wholesale Retail North America South America Green Global Wholesaler Wholesaler Energy Power Revenues at list price 425,000 600,000 140,000 95,000 Price discounts 37,000 43,000 7,600 470 Revenues at actual prices 388,000 557,000 132,400 94,530 Cost of goods sold 320,000 455,000 117,000 86,000 Gross margin 68,000 102,000 15,400 8,530 Customer-level operating costs: Delivery Order processing Sales visits Total cust-level oper. costs Customer-level operating income S 500 660 160 125 750 1,010 185 145 5,900 5,100 2,100 1,550 7,150 6,770 2,445 1,820 60,850 $ 95,230 $ 12,955 $ 6,710 Requirement 2. Prepare a customer-cost hierarchy report. (Enter amounts in thousands.) Customer Distribution Channels (all amounts in thousands of U.S. Dollars) Wholesale Customers Retail Customers Total Revenues at actual prices Total N. America S. America Total Wholesale Wholesaler 388000 Green Global Wholesaler Retail Energy Power 557000 132400 94530 Customer-level costs Customer-level operating income Distribution-channel costs Distribution-channel-level oper. inc. Corporate-sustaining costs Operating income