Question
Sirius Company currently allocates indirect costs to customers at a rate of 24% of Gross Margin dollars. Sirius has two customers V Star and Q
Sirius Company currently allocates indirect costs to customers at a rate of 24% of Gross Margin dollars. Sirius has two customers V Star and Q Star with data as follows: V Star Q Star ABC Cost Rate Units Sold 53,640 12,770 ---- Gross Margin per unit $ 80 $ 80 ---- Number of Purchase Orders 8,000 6,000 $68.00 / purchase order Number of Deliveries 5,700 3,900 $ 15.00 /delivery Number of Expedited deliveries 400 340 $ 46.00 / exp. delivery Customer Visits 1,770 2,380 $ 35.00 / customer visit a. Calculate Operating Income for customers V Star and Q Star using the current allocation method to allocate support costs to customers. b. Calculate Operating Income for customers V Star and Q Star using the ABC method to allocate support costs to customers. c. What is your most important insight about customers V Star & Q Star based on your analysis above?
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