#6.3

Colleen Company has gathered the following data pertaining to activities it performed for two of its major customers.

	Jerry Inc.				Kate Co.
Number of orders		3				60
Units per order		1,000				400
Sales returns:
Number of returns		1				5
Total units returned		50				130
Number of sales calls		11				3

Colleen sells its products at $190 per unit. The firms gross margin ratio is 25%. Both Jerry and Kate pay their accounts promptly and no accounts receivable is over 30 days. After using business intelligence software to carefully analyze the operating data for the past 30 months, the firm has determined the following activity costs:

Activity	Cost Driver and Rate
Sales calls	$ 600	per visit
Order processing	270	per order
Deliveries	180	per order
Sales returns	210	per return and $4 per unit returned
Sales salary	95,000	per month

Required:

1.

Classify activity costs into cost categories (unit, batch, etc.) and compute the total cost for Colleen Company to service Jerry Inc. and Kate Co.

2.	Compare the profitability of these two customers. (Loss amounts should be indicated by a minus sign. Round operating margin (loss) to 2 decimal places (i.e. .2134 should be entered as 21.34%).)

Jerry Inc. Kate Co. Customer unit level costs: Customer batch level costs: Customer sustaining costs: Total