QUESTION 1 40 points Save Answer Customer Profitability Analysis (40 marks) Tech Company manufactures one product, Product A. The price and cost of goods sold per unit are as follows: Price per unit Cost of goods sold per unit Gross profit per unit $1,500 970 $ 530 In addition, the company incurs sales and administrative expenses of $960,000. The company wishes to assign these overhead costs to their three major customers, Customers 1, 2 and 3. These expenses are related to three major non manufacturing activities: call centre support, invoicing and engineering support (cost pools). The engineering support is in the form of engineering changes that are placed by the customer to change the design of a product. The full-time equivalent (FTE) staff and activity cost drivers associated with these activities are: Call centre support Invoicing Engineering support FTE 20 80 65 Activity Cost Driver Number of calls Number of invoices Number of customer design changes Total 165 Customer 1 requires extensive support in the form of sales order processing, service and engineering support, as can be seen from the following activity information: Total 300 Customer 1 Customer 2 Customer 3 160 50 90 280 80 140 80 40 30 Number of calls Number of invoices Number of customer design charge Unit volume 500 150 1,800 2,000 2,200 5.000 Required: (a) Determine the activity costs for each of the three major non-manufacturing cost pools that constitute the sales and administrative overhead costs (6 marks). ib) Determine the activity cost driver rates for each cost pool in part (a) (6 marks). id) Determine the activity costs for the three customers using the activity cost driver rates in part ) (6 marks). Construct customer profitability reports for the three customers, using the activity costs in part 1c (9 marks) and interpret your results (4 marks). Identify and discuss three strategies for managing any unprofitable customer(s) (6 marks). Under whal circumstances would you divest of an unprofitable customer? (3 marks). le}