Analysis for Towels amp; More Common costs refer to the cost of resources used by multiple divisions, departments, or another type of grouping.

Note that the contribution margin ratio varies due to different quality of towels sold to the stores.

Required:

Computations (use Excel).

• Calculate the customer support and distribution costs associated with the three types of customers.
• Use a simple strategy first and allocate the costs based on revenues.
• Recalculate the allocations using activity based costing (ABC) based on the information in the table above.
• Determine contribution margin less customer support and distribution costs for both approaches above.

Memo (use Word).

Which type of customer should the company support and why? Refer to your analysis in your response. Write a four or five paragraph memo to the owner of the business. Start with an introduction and end with a recommendation. Each of the four or five paragraphs should have a heading.

Short essay (use Word).

Read the background information and do additional research as needed to comment on the following topics.

What are the characteristics of companies that may benefit from an ABC allocation system?

Start with an introduction and end with a summary or conclusion. Use headings. Maximum length of two pages.