Using value-chain costing to measure customer profitability Refer to the data about the Monroe Paper Company presented

Question:

Using value-chain costing to measure customer profitability Refer to the data about the Monroe Paper Company presented in Exercise 17-4. Additional information is presented below.

Big City Newspaper receives a 12 percent discount because of its large quantity of newsprint. Small City Newspaper receives a five percent discount, and Weekly Newspaper gets no dis- counts. Marketing costs, which are primarily order receiving and processing are 70 percent traceable to Big City Newspaper, 25 percent to Small City Newspaper, and the rest to Weekly Newspaper. Weekly Newspaper receives monthly shipments of newsprint which accounts for $5,000 of distribution cost. The remaining distribution costs are shared 75/25 by Big City and Small Town Newspapers. The customer service costs pertain to Monroe's replacement of faulty rolls of newsprint either from bad paper or bad roll. The firm sends an inspector around to firms to check complaints. The cost of this service is split 80 percent, 15 percent, and 5 percent between Big City, Small Town, and Weekly Newspapers, respectively.