Question Two Belyurn Ltd (Belyurn) manufactures air-conditioning units and is based in Lancashire in the UK. Its Claret division sells to three customers only, companies knowns as Benn, Nabb and Leah. Forecast data relating to sales, costs and activity for the three customers are as follows: Benn Nabb Sales revenue 4,800,000 Gross profit 40% Directly attributable overhead costs 390,000 6,000,000 40% 440,500 Leah 40% Total 3,600,000 14,400,000 380,750 1,211,250 (not included in Cost of Sales) Number of orders taken 20 100 55 175 Number of units sold 480 750 400 1,630 Warehouse space occupied 45 60 40 145 (square metres) Belyurn's overhead costs for the Claret division, which are not part of the costs in the table above, are estimated to be: Indirect Cost Cost Driver Cost () Order Taking Number of orders taken 540,000 Packing Number of units packed 940,000 Dispatch Number of units dispatched 910,000 Warehousing Cost of floor space occupied by goods 300,000 Accounts Admin. Number of orders taken 640,000 Total 3,330,000 The Directors of Belyurn are keen to implement Activity-Based Management techniques to improve the strategic management of the company. Required (a) (b) Using Activity-Based techniques, for each customer of Belyurn's Claret division, prepare a schedule which shows the net profit per customer in s and in % terms. Show all workings, including cost per cost driver for each activity. (15 marks) Explain to the directors of Belyurn Ltd how Activity-Based Management techniques can improve the profitability of the Claret division's three customers. Use your calculations from part (a) to illustrate your answer. UMADQH-15-3 (10 marks) (Total 25 marks) Page 4 of 7