Ruiz Wholesalers operates at capacity and sells furniture items to four department- store chains (customers). Mr. Ruiz commented, “We apply ABC to determine product- line profitability. The same ideas apply to customer profitability, and we should find out

Activity Cost- Driver Rate
Regular order processing.......... $ 32 per regular order
Rush order processing........... $ 160 per rush order
Returned items processing.......... $ 20 per item
Catalogs and customer support ........$ 1,000 per customer

Customers pay the transportation costs. The cost of goods sold averages 80% of sales.

Required
Determine the contribution to profit from each chain last year. Comment on yoursolution.

Transcribed Image Text:

Chain Gross sales $75,000 $45,000 $95,000 $85,000 Sales retums: Number of items 101 28 68 35 6,650 8,000 Amount $15,000 $ 6,500 Number of orders: 65 57 Regular Rush 165 56 90 18 40