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Required:
a. Compute the 2015 gross-margin percentage for each of Pharmaguard’s three market segments.
b. Compute the cost driver rates for each of the five activity areas.
c. Use the activity-based costing information to allocate the $301080 of “other operating costs” to each of the market segments. Compute the operating profit for each market segment.
d. Comment on the results. What new insights are available with the ABC information?
e. The senior management at Phramaguard plans to implement ABC in its retail operations, manufacturing operations and its medical centre operations. The staff in these divisions are not in favour of implementing ABC and the Activity-based management (ABM). They are resisting these changes. Some employees are questioning, “why does the company need to change at all”?
f. As a consultant, give your professional advice on the benefits and limitations of adopting ABC for all its all operations at Pharmaguard.
Please note:
You need to present both parts -- your computational work and advice -- in a professional business report format.
