Ramirez Corp. has two customers, C1 and C2. Ramirez Corp currently allocates indirect costs to customers at a rate of 5% of customer revenue. Data for C1 and C2 are as follows:

a. Using the current costing system to allocate support costs, calculate Operating Income for customers C1 and C2.

Ramirez Corp.s Management Accountant has gathered the following ABC rate information:

b. Calculate the total support cost allocated to C1 & C2 using the Activity Based Costing (ABC) system.

c. Comparing the indirect cost allocated in part a. to the indirect cost allocated in part b. discuss an important strategic implication (not operational-dont discuss ABC activity usage) of your analysis.

C1 C2 Selling Price per unit Units Sold Manufacturing Cost per unit Number of Regular Orders Number Rush Orders Number Deliveries Customer Visits $20.00 50.000 $15.00 112 105 77 40 $20.00 12,000 $15.00 27 68 50 35 Number of purchase orders Number of deliveries Number of inspections Number of customer visits ABC Cost Rate $40 per purchase order $85 per delivery $200 per expedited delivery $400 per customer visit