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PT ABC manufactures cabinets. At the request of PT ABC's VP of marketing, the cost management staff has recently completed a customer-profitability study. The
PT ABC manufactures cabinets. At the request of PT ABC's VP of marketing, the cost management staff has recently completed a customer-profitability study. The following activity-based costing information was the basis for the analysis: Customer Related Activities Cost Driver Base Cost Driver Rate (S) Sales activity sales visits 3,000 Order taking purchase orders 750 Special handling units handled 250 Special shipping shipments 1,500 Cost driver data for two of PT ABC biggest customers for the year 2020 are: Customer Related Activities Customer X Customer Y Sales activity Order taking Special handling Special shipping 30 40 20 40 sales visits purchase orders 400 500 25 20 units handled shipments The following additional information has been compiled for PT ABC for two of its biggest customers, Customer X and Customer Y, for the year 2020: Quantity Sold Customer X Customer Y 400 500 Sales Price 1,400 1,400 Sales Revenue 560,000 700,000 Cost of Goods Sold 140,000 175,000 General Selling Costs 154,000 98,000 General Administrative Costs 70,000 65,000 Required: 1. Calculate customer related costs for each of PT ABC's biggest customers 2. Calculate customer level operating income 3. Comment on the result from QI & Q2. which is less not profitable and why 4. What recommendation would you like to give to PT ABC related to the result of you analysis from Q1-Q3
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