Bernese, Inc., manufactures and distributes a variety of health products, including velcrofastened wrist stabilizers for people with
Question:
Bernese, Inc., manufactures and distributes a variety of health products, including velcrofastened wrist stabilizers for people with carpal tunnel syndrome. Annual production of wrist stabilizers averages 200,000 units. A large chain store purchases about 40 percent of Bernese’s production. Several thousand independent retail drugstores and medical supply stores purchase the other 60 percent. Bernese incurs the following costs of production per box:
Bernese has one salesperson assigned to the chain store account at a cost of \($65,600\) per year. Delivery is made in 1,000 unit batches about three times a month at a delivery cost of \($600\) per batch. Four salespeople service the remaining accounts. They call on the stores and incur salary and mileage expenses of approximately \($39,900\) each.
Delivery costs vary from store to store, averaging \($0.45\) per unit.
Bernese charges the chain store \($6.25\) per box and the independent stores \($6.50\) per box.
Required:
Is Bernese’s pricing policy supported by cost differences in serving the two different classes of customer? Support your answer with relevant calculations.
Step by Step Answer:
Cost Management Accounting And Control
ISBN: 9780324233100
5th Edition
Authors: Don R. Hansen, Maryanne M. Mowen