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Activity-based costing, customer profitability Samson Company operates a mail order busi- (L ness and has three major activities: order taking, packaging, and returns. Customers call
Activity-based costing, customer profitability Samson Company operates a mail order busi- (L ness and has three major activities: order taking, packaging, and returns. Customers call into the order taking department to place their orders. It takes the order taking st fixed amount of 5 minutes to take each order plus 0.5 minutes for each item in the order. Once the order taking process is complete, the order is sent electronically to the packaging department. It takes the packaging staff a fixed amount of 6 minutes to package each order plus 3 minutes for each item in the order. Because it is a mail order business, Samson allows its customers to return unwanted products. It takes the returns staff a fixed amount of 5 minutes to process each return order plus 2 minutes for each item being returned. The processing times are summarized below. WEEKLY WEEKLY HOURLY SALARY HOURS RATE Order taking staff Packaging staff. Returns staff. $1,184 $ 950 $1,224 37 38 36 $32.00 $25.00 $34.00 Information on two of Samson's customers appears below. CUSTOMER 1 2 Average price of each item ordered Average cost of each item ordered. Number of orders .. Average number of units in each order Number of return requests. Average number of items in each return request. $10 $6 20 10 5 5 $10 $6 10 20 3 4 Required Calculate the profit associated with each of these two customers
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