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Problem 5-Customer Profitability/Cost Allocation: (40 points) Management has begun a profitability review of their customers. They have selected two customers for review at their next
Problem 5-Customer Profitability/Cost Allocation: (40 points) Management has begun a profitability review of their customers. They have selected two customers for review at their next session. Before the review began, ABC was used to develop these Activity Areas and related Cost Driver Rates: Activity Areas 1. Sourcing cost 2. Processing fee 3. Packing mat'l 4. Delivery Cost Driver Rate $1,000 $4,300 $500 $450 The customers selected for review and their relevant information are: Sales Variable cost 1. Sourcing cost 2. Processing fee 3. Packing mat'l 4. Delivery ABC $3,000,000 $1,900,000 500 60 XYZ $2,000,000 $1,000,000 100 5 50 15 100 75 Required: a. Use the ABC information to compute the operating income of each customer. This information will be submitted to your boss and the management team for review and decisions on how to proceed with each customer
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