Distribution Distribution Total Channel A Channel B Revenue $850,000 $910,000 $1,760,000 Customer-level costs 628,000 $222,000 26.1% 532,400 $377,600 41.5% 1,160,400 $ 599,600 34.07% Customer-level operating income Customer-level operating income as a percentage of revenue The company allocates distribution channel costs of marketing and administration as follows: Total Allocation basis Distribution-channel costs Marketing costs $260,000 Channel revenue Administration costs S200,000 Customer-level costs Based on a special study, the company allocates corporate costs to the two channels based on the cor- porate resources demanded by the channels as follows: Distribution Channel A, $45,000, and Distribution Channel B, $55,000. If the company were to close a distribution channel, none of the corporate costs would be saved. 1. Calculate the operating income for each distribution channel as a percentage of revenue after assign- ing customer-level costs, distribution-channel costs, and corporate costs. 2. Should Vocal Speakers close down any distribution channel? Explain briefly including any assumptions that you made. 3. Would you allocate corporate costs to divisions? Why is allocating these costs helpful? What actions would it help you take? Required

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Question

Cost-hierarchy income statement and allocation of corporate, division, and channel costs to customers. Vocal Speakers makes wireless speakers that are sold to different customers in two main distribution channels. Recently, the company’s profitability has decreased. Management would like to analyze the profitability of each channel based on the following information:

Distribution
Distribution
Total
Channel A
Channel B
Revenue
$850,000
$910,000
$1,760,000
Customer-level costs
628,000
$222,000
26.1%
532,400
$377,600
41.5%
1,160,400
$ 599,600
34.07%
Customer-level operating income
Customer-level operating income as a
percentage of revenue
The company allocates distribution channel costs of marketing and administration as follows:
Total
Allocation basis
Distribution-channel costs
Marketing costs
$260,000
Channel revenue
Administration costs
S200,000
Customer-level costs
Based on a special study, the company allocates corporate costs to the two channels based on the cor-
porate resources demanded by the channels as follows: Distribution Channel A, $45,000, and Distribution
Channel B, $55,000. If the company were to close a distribution channel, none of the corporate costs would
be saved.
1. Calculate the operating income for each distribution channel as a percentage of revenue after assign-
ing customer-level costs, distribution-channel costs, and corporate costs.
2. Should Vocal Speakers close down any distribution channel? Explain briefly including any assumptions
that you made.
3. Would you allocate corporate costs to divisions? Why is allocating these costs helpful? What actions
would it help you take?
Required

Expert Solution

Trending now

This is a popular solution!

Step by step

Solved in 3 steps with 1 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions