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4- Taylors Cheesecakes supplies cheesecakes to three large supermarket chains. Management has become concerned about the rising costs associated with the processing and dispatch of
4- Taylors Cheesecakes supplies cheesecakes to three large supermarket chains. Management has become concerned about the rising costs associated with the processing and dispatch of orders. An activity analysis of the indirect costs identified the following customer-related costs: Activity cost Cost driver Estimated Total expected Use of cost driver Pool indirect cost use of cost driver* supermarket customer 1 2 3 Orders processing Number of orders $200 000 450 300 100 50 Returns processing Number of returns $ 50 000 100 50 25 25 Delivery Number of deliveries $100 000 700 400 200 100 Rush orders Number of rush orders $ 70 000 50 10 20 20 Sales visits Number of visits $ 20 000 100 50 25 25 *Expressed in units of measure of the driver. Sales are marked up 50% on cost. Required (a) Calculate the activity cost rate for each activity. (b) Assign the activity costs to each of the three customers. (c) Calculate the contribution for each customer if the sales pattern for each is as follows: Customer 1 $300 000; Customer 2 $150 000; Customer 3 $200 000. (d) Advise the management of Taylors Cheesecakes as to whether any changes should be made in its relationships with customers
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