14-19 Customer profitability, customer-cost erarchy. Enviro-Tech has only two retail and two wholesale customers. Information relating to each customer for 2017

Excerpt
Power $375,000 $590,000 $130,000 Revenues at list prices Discounts from list prices Cost of goods sold Delivery costs Order processing costs 25,800 285,000 47,200 510,000 6,710 8,400 144,000 2,230 2,180 590 95,000 4,550 3,820 6,300 5,980 2,620 2,145 1,130 Cost of sales visit 2,620 1,575

14-19 Customer profitability, customer-cost erarchy. Enviro-Tech has only two retail and two wholesale customers. Information relating to each customer for 2017 follows (in thousands): Enviro-Tech’s annual distribution-channel costs are $33 million for wholesale customers and $12 million for retail customers. The company’s annual corporate-sustaining costs, such as salary for top management and general-administration costs are $48 million. There is no cause-and-effect or benefits-received relationsp between any cost-allocation base and corporate-sustaining costs. That is, Enviro-Tech could save corporate-sustaining costs only if the company completely shuts down. 1. Calculate customer-level operating income using the format 2. Enviro-Tech’s management decides to allocate all corporate-sustaining costs to distribution channels: $38 million to the wholesale channel and $10 million to the retail channel. As a result, distribution channel costs are now $ 71 million ( $ 33 million + $ 38 million ) $71 million ($33 million + $38 million) for the wholesale channel and $ 22 million ( $ 12 million + $ 10 million ) $22 million ($12 million + $10 million) for the retail channel. Calculate the distribution-channel-level operating income. On the basis of these calculations, what actions, if any, should Enviro-Tech’s managers take? Explain. 3. How might Enviro-Tech use the new cost information from its activity-based costing system to better manage its business? Transcribed Image Text: Wholesale Custonmers
North America
Retail Customers
South America
Green Energy
$175,000
Wholesaler
Wholesaler
Global Power
$375,000
$590,000
$130,000
Revenues at list prices
Discounts from list prices
Cost of goods sold
Delivery costs
Order processing costs
25,800
285,000
47,200
510,000
6,710
8,400
144,000
2,230
2,180
590
95,000
4,550
3,820
6,300
5,980
2,620
2,145
1,130
Cost of sales visit
2,620
1,575

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