The case relates to the sales related to customers and the management has information about costs ,expenses and revenues, what factors should be considered by Otago decos management when associating costs and operating expenses with customers,why should that be done?examine the table 1

Conducting onlineorder Operating to the factory receiving re ject. Daniel Explained that allocating costs to customers would require information about the activities performed to serve the customers, and that is where marketing fits in. He also cautioned that if allocations were too arbitrary, they would "muddy the waters" and reduce the reliability of the information. Frankie understood and agreed to help. Daniel prepared a breakdown of Otago Dcor's operating expenses (Table 2). His intent was to identify expenses that could reasonably be related to customer activity. Once that was achieved, he hoped to be able to drive the expenses down to individual customers. Identifying customers a Shipping and ship-pit Handling cu returned me Table 2. Otago Dcor's Operating Expenses Year Ended December 31, 2018 > * Administrative Wages Advertising Building Depreciation Maintenance Office Equipment Depreciation to Promotional Materials Sales Staff Commissions and Wages Shipping Taxes and Insurance Travel Utilities and Fuel 2 Warehouse Wages $368,000 71,852 48,600 38,718 8,400 58,000 361,416 42,893 15,283 92,788 6,491 152,817 11,548 $1,276806 Daniel IE to use the a He also add that did not that using's make the cc waste of tin operating e appropriate pool to the customers customer.IO done before X Other Totalt Table 4. Cu New Custo Customer Customer Meanwhile, Frankie and the staff began brainstorming about the activities Otago Dcor performed to serve its customers. They did not want to be so specific as to make the analysis unwieldy, but defining the activities too broadly would not be useful either. Eventually, they identified major customer-servicing activity categories (Table 3). Conducting administrative activities related to negotiating contracts withtarge, repeat customers to ire Conducting clerical activities related to processing orders, including onlineorders and customer accounting Operating the warehouse, including receiving completed goods from the factory, collecting items and preparing them for shipping, and receiving returns uld Identifying potential customers and efforts related to acquiring new customers and account setup Shipping merchandise to customers' "free on board destination" and ship-ping merchandise returns Handling customer questions and complaints, processing and restocking returned merchandise Daniel liked the list Frankie presented to him and decided to use the activities as the cost pools for the ABC analysis. He also added a pool, "other," which would be used for costs that did not fit well into any other cost pool but he warned that using 'other' pool as a dumping place for activities will make the cost allocations arbitrary and all the exercise a waste of time. The next step would be to allocate the operating expenses to the cost pools, then identify the most appropriate cost drivers to allocate the costs in each.cost. pool to the customers. They used example of three customers (Table 4) to evaluate profitability of each customer. It was a start, but there was much work to be done before all customers could be individually analysed. Table 4. Customers' sales for the Year Ended December 31, 2018 Customer Name New Customer Customer 1 Customer 2 Annual sales $87,500 $437,500 $131,250 Conducting onlineorder Operating to the factory receiving re ject. Daniel Explained that allocating costs to customers would require information about the activities performed to serve the customers, and that is where marketing fits in. He also cautioned that if allocations were too arbitrary, they would "muddy the waters" and reduce the reliability of the information. Frankie understood and agreed to help. Daniel prepared a breakdown of Otago Dcor's operating expenses (Table 2). His intent was to identify expenses that could reasonably be related to customer activity. Once that was achieved, he hoped to be able to drive the expenses down to individual customers. Identifying customers a Shipping and ship-pit Handling cu returned me Table 2. Otago Dcor's Operating Expenses Year Ended December 31, 2018 > * Administrative Wages Advertising Building Depreciation Maintenance Office Equipment Depreciation to Promotional Materials Sales Staff Commissions and Wages Shipping Taxes and Insurance Travel Utilities and Fuel 2 Warehouse Wages $368,000 71,852 48,600 38,718 8,400 58,000 361,416 42,893 15,283 92,788 6,491 152,817 11,548 $1,276806 Daniel IE to use the a He also add that did not that using's make the cc waste of tin operating e appropriate pool to the customers customer.IO done before X Other Totalt Table 4. Cu New Custo Customer Customer Meanwhile, Frankie and the staff began brainstorming about the activities Otago Dcor performed to serve its customers. They did not want to be so specific as to make the analysis unwieldy, but defining the activities too broadly would not be useful either. Eventually, they identified major customer-servicing activity categories (Table 3). Conducting administrative activities related to negotiating contracts withtarge, repeat customers to ire Conducting clerical activities related to processing orders, including onlineorders and customer accounting Operating the warehouse, including receiving completed goods from the factory, collecting items and preparing them for shipping, and receiving returns uld Identifying potential customers and efforts related to acquiring new customers and account setup Shipping merchandise to customers' "free on board destination" and ship-ping merchandise returns Handling customer questions and complaints, processing and restocking returned merchandise Daniel liked the list Frankie presented to him and decided to use the activities as the cost pools for the ABC analysis. He also added a pool, "other," which would be used for costs that did not fit well into any other cost pool but he warned that using 'other' pool as a dumping place for activities will make the cost allocations arbitrary and all the exercise a waste of time. The next step would be to allocate the operating expenses to the cost pools, then identify the most appropriate cost drivers to allocate the costs in each.cost. pool to the customers. They used example of three customers (Table 4) to evaluate profitability of each customer. It was a start, but there was much work to be done before all customers could be individually analysed. Table 4. Customers' sales for the Year Ended December 31, 2018 Customer Name New Customer Customer 1 Customer 2 Annual sales $87,500 $437,500 $131,250