Golden Beach Company’s cost system assigns assigns marketing

| April 14, 2018

Golden Beach Company’s cost system assigns assigns marketing, selling, distribution, and administrative expenses (activities) to customers using a rate of 33% of sales revenue. The new CFO has discovered that Golden Beach’s customers differ greatly in their ordering patterns and interaction with Golden Beach’s sales force. Because the CFO believes Golden Beach’s cost system does not accurately assign marketing, selling, distribution, and administrative expenses to customers, he developed an ABC system and gathered the following information.Austin BrookeSales $875,000 $710,000Cost of Goods Sold 425,000 305,000Sales representative travel 1 9,000 86,000Service customers 32,000 222,000Handle customer orders 8,000 27,000Ship to customers 45,000 140,0009.1. Using the current cost system’s approach of assigning assigns marketing, selling, distribution, and administrative expenses to customers using a rate of 33% of sales revenue, determine the operating profit associated with Austin and with Brooke.Austin ___________________Brooke ___________________9.2. Using the activity-based costing information provided, determine the operating profit associated with Austin and with Brooke.Austin ___________________Brooke ___________________9.3. Which of the two methods produces more accurate assignments of assigns marketing, selling, distribution, and administrative expenses to customers? Explain.

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