Question 1 (35 marks) Shun On Computer Company (Shun On) sells computer products, mainly desktops (PCs) and laptops, to small and medium-sized enterprises. The company is also the authorized dealer for one type of accounting software. Based on the contract with the software company, Shun On is required to hire an instructor to support customers in using the software. Shun On operates at capacity and allocates selling, general, and administration (S, G & A) costs to each product line using the cost of merchandise for each product line. Shun On's General Manager is currently very disappointed with the business's results. He wants to optimize the pricing and cost management for each product line, and is wondering if its accounting system is providing it with the best information for making such decisions. The following is a summary of the company's product line information and its selling, general, and administration costs for six months period ended 30 June 2020. Product line information PC Laptop Accounting software $7,600,000 $6,004,000 $5,000,000 $3,760,000 Revenues Cost of merchandise Salary of software instructor Number of purchase orders placed Number of deliveries received Salespeople work hours Unit sold 360 280 2,000 540 300 2,800 420 $1,600,000 $1,100,000 $ 108,000 560 360 3,000 1,000 840 Selling, general and administration costs incurred: Purchasing department expenses Receiving department expenses Sales and marketing department expenses After-sale service expenses (repairs, product returns, etc.) $820,000 800,000 1,100,000 120,000 $2.840.000 Required: (a) Suppose Shun On uses the cost of merchandise to allocate all S, G & (10 marks) A costs. Prepare product-line and total company profitability reports. (b) Identify an improved method for allocating costs to the three product (10 marks) lines. Use the method for allocating S, G&A costs that you propose to prepare new product line and total company profitability reports. (c) Compare your results in requirement (b) to the results in requirement (15 marks) (a). Advise the General Manager based on your findings