QUESTION 6 The Clutchmore Municipal Council ("CMC") serves two broad categories of customers - Individuals and Corporates. The management of CMC is increasingly concerned with rising costs involved in serving its customers. As a result, a study was conducted to analyse the billings and costs for each category of customers. An activity analysis of the indirect costs identified the following customer-related costs: Estimated indirect cost (8) 600,000 Total Use of cost driver expected use Individuals Corporates of cost driver 750 450 300 Activity cost Cost driver pool Consultations No. of appointments Cases processing No. of cases Travel No. of kilometres 500,000 90,000 250 36,000 200 30,000 50 6,000 Total billings (sales) for Individuals and Corporates are $4,800,000 and $4,000,000 respectively. Billings (sales) are marked up to 25% on cost. Required: a) Calculate the gross profit and the gross profit margin for each category of customer. Which customer category earns more gross profit for CMC? (3% marks) b) For each activity cost pool, calculate the activity cost rate. (1% marks) c) Assign the activity cost rates to the two customer categories. (3 marks) d) For each customer category, calculate the total (full) cost, the net profit, and the net profit margin. Which customer category earns more net profit for CMC? (3% marks) e) Discuss any differences in the results of parts (a) and (d). Should any changes be made to CMC's pricing strategy? Why or why not? (Maximum 200 words) (3% marks) [Total: 15 marks]