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activity based cost in and income statement need solution

Gomtek Auto Performance Parts Ltd.
Domenic Cianflone, MBA, PhD, FCMA (see attached file)

Gomtek Auto Performance Parts Ltd. is an importer of after-market auto parts, located in Toronto. Since its inception in 2001, the company has developed a reputation for sourcing rare performance parts (mainly exhaust systems) for luxury vehicles.

The CFO of the company has engaged your services to understand the cost to serve its four largest customers. Its first customer, Hillson Auto, is a large chain of retail-based auto parts stores that uses Gomtek to supply its own private-label brand. The second customer is Mauro's Automotive, an automotive repair shop that specializes in luxury Japanese vehicles. The third customer is Hambley Auto Parts, which specializes in luxury German vehicles. Finally, Drossel Automotive is a high-end retailer of auto parts that services automotive enthusiasts.

Gomtek's Controller has developed the following information:

* Refers to shipping charges incurred when shipping product back to suppliers.

The CFO is concerned about who is the most profitable to service, as there have been considerable pressures to hit higher profits. He has engaged your service to assist with this initiative.


Use activity-based costing to prepare income statements for each individual customer. Hints: calculate your cost per driver then use all information in the case to prepare the income statements.

©D.Cianflone 2009

See attached file.


Solution Summary

The solution discusses activity cost in and income statement.