Question 2. Mike (HK) Ltd is a large-scale producer of quality fresh sandwiches which are sold to various outlets, cafes, fast food providers, airlines and institutions such as hospitals and schools. They establish contracts with these customers for the supply of the sandwiches at a selling price per pack of $11. They produce all the sandwiches to a standard cost of $6 each, blending the ingredients based on their seasonal prices. Sales are managed by a product team which maintains contact with the customer to assess satisfaction with quality and delivery and to agree prices and discounts based on volume and loyalty factors. The sales and marketing department are authorised to make minor adjustments to the (\$11) list price of sandwiches and the sales revenues applicable to a sample of key customers are shown below: Mike (HK) Ltd are keen to carry out some customer profitability analysis (CPA). Initially to carry out the CPA they took a traditional approach and applied all selling and distribution overheads to customers by using a single rate per pack of sandwiches sold. This was based on total annual sales of 1,200,000 units (packs) for the year in question. However, they soon realised this traditional approach to be too simplistic, so they have started some analysis informed by Activity-based Costing (ABC). A team led by the management accountant has analysed the costs related to selling and distribution overheads into a number of cost pools. This analysis is listed below