QUESTION 1: Gynriostsehetl Inc is a popular Cushion Manufacturer that produces and sells exotic Cushions made of feathers from an exotic bird that lives in an exotic planet, and eats exotic plant life serious. The company, having heard that you are taking ACCT& 203 at TCC, has hired you as an executive consultant. After thorough consultations and analysis, you have developed the following activity cost pools for the manufacturing overhead and other indirect costs.

REQUIRED

Compute the customer margin derived from the customer (Awree Natcacnotus) above

EXPLAIN four disadvantages (limitations) of Activity Based Costing

QUESTION 2: Gynriostsehetl Inc is a major distributor of medical equipment based in Seattle, Washington. The company purchases the medical equipment from a wholesaler, (terms 2/10, n/30 FOB shipping point) and resells them to hospitals and other HealthCare providers all over the Pacific Northwest (the wholesaler buys the equipment from an overseas manufacturer). The company has built a reputation of quick delivery time, and has an owned fleet of vehicles that deliver equipment to customers. The equipment sold range in size from heavy machines for hospitals to small equipment (tool type and supplies) for hospitals, dental clinics, and medical massage parlors. Gynriostsehetl Inc sets all its prices for all customers by marking up its cost of goods sold to those hospitals by 31 %. For example, if a customer buys equipment (supplies) that had cost $100, Gynriostsehetl Inc would charge the customer $131. The margin seemed sufficient in the past, but with rising costs, and inability to increase selling prices due to competition, the company is looking for ways to reduce its costs. The company broke its selling and administrative expenses into five activities (cost pools) as shown below (for the year 2016):

ADDITIONAL INFORMATION ON COST POOLS

Customer Deliveries see above

Order processing including costs associated with resources used in order taking and data entry, picking, sorting, weighting, labeling, packing, consolidation, loading, and tracking. About 72% of all customers order electronically with the rest ordering manually. All this is managed in-house by employees of Gynriostsehetl

Customer Support includes installation at customer sites and training customers on how to install / assemble and perform routine maintenance; troubleshooting either on the phone or on customers site; returns and refunds; etc.

Rebilling and Collections costs associated with issuing new statements and invoices for overdue amounts, telephone calls to overdue customers, meeting with overdue customers, attorney fees for litigation dealing with overdue customers, etc.

Other as noted above, this cost pool includes organization sustaining costs as well as costs associated with idle capacity.

#: Customers in the Medical Passage Parlors category have intermittent payment behavior, with most of their payments received past the due dates.

REQUIRED: Based on all the above data and information, what SPECIFIC and PRACTICAL recommendations or suggestions would you provide management of this company. Note: No calculations needed - all calculations have been completed above for you.

TOTAL ACTIVITY ACTIVITY COST POOL ACTIVITY MEASURE TOTAL COST Supporting Direct Labor Batch Processing Order Processing Customer Service Other $296,000 $213,125 $84,000 Number of Direct Labor Hours Number of Batches Number of Orders Number of Customers This is an organization-sustaining activity 8,000 DLHs $182,000 400 batches 275 orders $220,000 200 customers NA During the year, the company completed four orders for one of its major customers, Awree Natcacnotus. Details of these orders are provided below: SUMMARY OF ORDERS TO AWREE NATCACNOTUS ORDER 1 Jan 400 ORDER 2 May ORDER 3 Jul 600 ORDER 4 Nov 600 Month of Order Units ordered Batches ordered Direct Materials cost per unit Direct labor hours per unit Direct labor cost per hour Selling Price per unit 200 $20 $25.00 $20 $20 $20 0.25 hours 0.25 hors0.25 hours 0.25 hours $25.00 $50 $25.00 S50 $25.00 $50 S50