Tetra Company€™s cost system assigns marketing, distribution, and selling expenses to customers using a rate of 33% of sales revenue. The new controller has discovered that Tetra€™s customers differ greatly in their ordering patterns and interaction with Tetra€™s sales force. Because the controller believes Tetra€™s cost system does not accurately assign marketing, distribution, and selling expenses to customers, she developed an activity-based costing system to assign these expenses to customers. She then identified the following marketing, distribution, and selling costs for two customers, Ashton and Brown:

The following additional information is available:

a. Using the current cost system€™s approach of assigning marketing, distribution, and selling expenses to customers using a rate of 33% of sales revenue, determines the operating profit associated with Ashton and with Brown.
b. Using the cost activity based-accounting information provided, determine the operating profit associated with Ashton and Brown.
c. Which of the two methods produces more accurate assignments of marketing, distribution, and selling expenses to customers? Explain.

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Ashton Brown hi Sales Reprenstative travel S9,000 Service customers Handle customer orders 1,000 Ship to customers 15,000 1.000 24,000 $42.000 110,000 12,000 72,000 Ashton Brown Sales S 430,000 S350,000 Cost of goods sold 220,000 155,000