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1. Identify expenses on the income statement that are sales fulfillment expenses and divide them into cost pools. a. Warehouse Expenses:
* warehouse personnel expenses, warehouse expenses (excluding personnel) * order entry expenses
b. Delivery Expenses: Freight, delivery truck expenses
2. Find the rate for each cost pool.

Activity cost pool| Cost | Activity processed| Average Rate| Warehouse Expense| $2,000,000| 80,000| $25.00|
Order Entry Expense | Manual Order| $800,000*20%=$160,000 | 16,000| $10.00| | Order Line| $800,000*75%=$600,000| 150,000| $4.00|
| EDI| $800,000*5%=$40,000| 8,000| $5.00|
Delivery Expense| Normal Delivery| $450,000$2,400,000*15/16| 75,000| $36.00| | | Total $2,700,000| | |
| Desktop Delivery | $200,000$2,400,000*1/16| 5,000| $70.00| | | Total $350,000| | |

3. Given the use of each resource in the sales fulfillment cycle, determine the profitability of each customer.

| Company A| Company B|
Activity cost pool| # of Activities Processed| Cost| # of Activities Processed| Cost| Warehouse Expense| 200| $5,000| 200| $5,000|
Order Entry Expense | Manual Order| 6 | $60| 100| $100| | Order Line| 60| $240| 180| $720|
| EDI| 6| $30| 0| 0|
Delivery Expense| Normal Delivery| 200| $7,200| 150| $5,400| | Desktop Delivery | 0| 0| 25| $1,750|
Total Cost| $12,530| $12,970|

Profitability | Company A| Company B|
| Current | ABC| Current | ABC|
SalesCost of items purchased| $103,000$85,000| $103,000$85,000| $104,000$85,000| $104,000$85,000| Gross Margin Warehousing, Distribution and Order Entry| $18,000$12,750| $18,000$12,530| $20,000$12,750| $20,000$12,970| Contribution to general and selling expenses, and profit| $5,250| $5,470| $6,250| $7,030| | $220| $780|

4. What should Dakota do based on the information you determined? Based on the results from using Activity-based...
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