6.

Customer Profitability Analysis The management of Paris Corporation have just completed a detailed review of its total selling and administrative costs for the last year which totaled $1,307,000. The following data was gathered as part of that review:

1. The Order Processing department incurred $207,000 in total direct costs and processed approximately 2,500 orders.
2. The Accounts Receivable department incurred $156,000 in total costs. Management estimates that one third of the time spent (and thus, of the total cost) in this department is related to collections/billing disputes and that approximately 1,000 collections/billing dispute calls were made. The remaining two thirds were common costs.
3. The Sales department incurred $735,000 in total costs and made approximately 700 sales calls.
4. The remaining $209,000 in costs were incurred in the general management of the selling and administrative activities at Paris.

In addition to the above, management has estimated that Paris incurs $3 every time a unit is returned in order to repackage and restock the units. London Company is Paris largest client and the following information was gathered by the sales manager relative to serving London: 10 sales calls per quarter 5 orders per month 3 collections/billing dispute calls per month 1,000 units returned per year Using this information, what is the estimated annual cost to serve London Company?