Kingston Company Produces Precision Components Required:
A

Essay

Kingston Company produces precision components.Kingston has 11 customers,one accounts for 60 percent of the sales,with the remaining ten accounting for the rest of the sales.The ten smaller customers purchase components in roughly equal quantities.Orders placed by the smaller customers are about the same size.Data concerning Kingston's customer activity follow:
Order-filling costs for Kingston Company total $360,000,and sales-force costs are $300,000. $\begin{array}{|l|r|r|} \hline & \begin{array}{r}\text { Large } \\\text { Customer }\end{array} & \begin{array}{r}\text { Ten Small } \\\text { Customers }\end{array} \\\hline \text { Units purchased } & 300,000 & 200,000 \\\hline \text { Orders placed } & 12 & 420 \\\hline \text { Number of sales calls } & 20 & 230 \\\hline \text { Manutacturing cost } & \$ 900,000 & \$ 600,000 \\\hline \text { Sales } & \$ 1,800,000 & \$ 1,200,000 \\\hline\end{array}$
.Required:
a.Determine the profitability of each of the two classes of customers (large and small).Allocate the order-filling and sales force costs to the customers based on sales volume.b.Determine the profitability of each of the two classes of customers (large and small).Allocate the order-filling and sales force costs to the customers using an activity-based costing approach.