Tetra Companys cost system assigns MSDA expenses to customers using a rate of 33% of sales revenue. The new controller has discovered that Tetras customers differ greatly in their ordering patterns and interaction with Tetras sales force. Because the controller believes Tetras cost system does not accurately assign MSDA expenses to customers, she developed an ABC system to assign these expenses to customers. She then identified the following MSDA costs for two customers, Ashton and Brown:

	Ashton	Brown
Sales representative travel	$9,000	$42,000
Service customers	15,000	110,000
Handle customer orders	1,000	12,000
Ship to customers	24,000	72,000

The following additional information is available:

	Ashton	Brown
Sales	$430,000	$350,000
Cost of goods sold	220,000	155,000

(a) Using the current cost systems approach of assigning MSDA expenses to customers using a rate of 33% of sales revenue, determine the operating profit associated with Ashton and with Brown.

	Ashton	Brown
Sales
Cost of goods sold
Gross margin
Marketing, selling, distribution, and administrative expenses
Operating profit
Operating profit/Sales %

*Note: Round the percentages to two decimal points (i.e. show 14.445% as 14.45%).

(b) Using the ABC information provided, determine the operating profit associated with Ashton and with Brown.

	Ashton	Brown
Sales
Cost of goods sold
Gross margin
Marketing, selling, distribution, and administrative expenses:
Sales representative travel
Service customers
Handle customer orders
Ship to customers
Total activity expenses
Operating profit
Operating profit/Sales %

*Note: Round the percentages to two decimal points (i.e. show 14.445% as 14.45%).

(c) Which of the two methods produces more accurate assignments of MSDA expenses to customers? Be able to explain your answer. AnswerCurrent approachABC approach

PLEASE BE SPECIFIC AND FILL IN THE CHART! PLEASE DO NOT GIVE NUMBERS WITHOUT SAYING WHERE THEY GO!