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b) Hector Gonzales runs the Floral Art Company, which supplies floral arrangements to three large supermarket chains throughout Australia. Management has become concerned about the rising costs associated with the process and dispatch of orders. An activity analysis of the indirect costs identified the following customer-related costs. Total Estimated expected indirect use of cost costs driver* Acitvity cost pool Cost driver Orders processing Number of orders Returns processing Number of returns Delivery Number of deliveries Rush orders Number of rush orders Sales visits Number of visits $200,000 $50,000 $100,000 $70,000 $20,000 450 100 700 50 100 Use of cost driver Supermarket customer 1 2 3 300 100 50 50 25 25 400 200 100 10 20 20 50 25 25 Required: i. Assign the activity costs to each of the three customers (6 marks) Click or tap here to enter text. ii. Calculate the contribution for each customer if the sales pattern for each is as follows: (6 marks) Supermarket customer 1 2 3 Sales revenue** $350,000 $160,000 $210,000 **Selling price is marked up 50% on direct cost of flowers. Hints: conduct a customer profitability analysis based on the above customer related indirect costs. Click or tap here to enter text. iii. What conclusion can we draw from the customer profit analysis? Advise the management of the Floral Art Company as to whether any changes should be made in its relationships with customers. Advise Hector as to how he should go about executing these changes. (4 marks)

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