Allied business products’ is offering commodity products to its customers by rooting their services on value added services motto. Currently, it has a traditional absorption costing system which allocates costs to all customers based on an overhead rate, ignoring the activity of customers. ‘Allied office products’ is considering introducing SBP pricing system. Based on the analysis, it is found that Allied should incorporate this system in the business as it will provide them with vital information on their customers. The analysis showed that ‘customer A’ is less loyal; however, it is comparatively profitable to the company. It is also recommended that Allied should implement ‘just in time’ inventory service.
1. Using the information in the text and in Exhibit 2, calculate "ABC" based services costs for the TFC business.
2. Should TFC implement the SBP pricing system?
3. What managerial advice do you have for allied about the Total Forms Control (TFC) business? How does Exhibit 6 relate to this question?