Adam Wilson is the management accountant for Gamma Restaurant Supply (GRS). Mandy Morgan, the GRS sales manager, and Adam are meeting to discuss the profitability of one of the customers, Little Tony's Pizza. Adam hands Mandy the following analysis of Little Tony's activity during the last quarter, taken from GRS's activity-based costing system: (Click the icon to view Little Tony's activity for the last quarter.) i (Click the icon for additional information.) Read the requirements. Requirement 1. Assume that Mandy is partly correct in her assessment of the report. Upon further investigation, it is determined that 5% of the order processing costs and 20% of the delivery costs would not be avoidable if GRS were to drop Little Tony's. Would GRS benefit from dropping Little Tony's? Show your calculations. (Enter losses in revenues as a negative amount. If the net effect is an operating loss enter the amount with parentheses or a minus sign.) Difference: incremental (loss in revenues) and savings in costs from dropping Little Tony's X Revenues Requirements Cost of goods sold Order processing 1 . Assume that Mandy is partly correct in her assessment of the report. Upon further investigation, it is Delivery determined that 5% of the order processing costs and 20% of the delivery costs would not be avoidable if Rush orders GRS were to drop Little Tony's. Would GRS benefit from dropping Little Tony's? Show your calculations. 2. Mandy's bonus is based on meeting sales targets. Based on the preceding information regarding gross Sales calls margin percentage, what might Mandy have done last quarter to meet her target and receive her bonus? How might GRS revise its bonus system to address this? Total costs 3. Should Adam rework the numbers? How should he respond to Mandy's comments about making Effect on operating income (loss) Little Tony's look more profitable? Print Done Help me solve this Etext pages Get more help - Clear all Check answer: Homework: Ch 12 QuIz ' More info Adam Wilson is the management accountant for Gamma Restaurant Supply (GRS). Mandy Morg following analysis of Little Tony's activity during the last quarter. taken from GRS's activity-based Mandy looks at the report and remarks, \"I'm glad to see all my hard work is paying off with Little Tony's. Sales E (Click the icon to view Little Tony's activity for the last quarter.) 0 (Click the icon for additio have 9"5 UP 8% over "'9 previous quarter!" Adam replies, \"Increased sales are great, but I'm worried about Little Tony's margin, Mandy. We were showing a prot with Little Tony's at the lower sales level. but now we're showing a loss. Gross margin percentage this quarter was 35%, down ve percentage points from the prior quarter. I'm afraid that corporate will push hard to drop them as a customer if things don't tum around." Read the @uiremens. 'That's crazy," Mandy responds. "A lot of that overhead for things like order processing, deliveries, and sales calls would just be allocated to other customers if we dropped Little Tonys. This report makes it look like we're losing money on Little Tony's when we're not. In any case, I am sure you can do something to make its protability look closer to what we think it is. No one doubts that Little Tony's is a very good customer." Requirement 1. Assume that Mandy' Is partly correct' In her assessment of the report. Upon furth Little Tony's Would GRS benet from dropping Little Tony' 5? Show your calculations. (Enter loss Difference: incremental (loss in revenues) and savings in costs from dropping Little Tony's Revenues Cost of goods sold Order processlng Delivery Data table Rush orders Sales calls Sales Total costs Cost of goods sold (all variable) Effect on operating income (loss) Order processing (28 orders processed at $300 per order) 8.400 Delivery (2,400 miles driven at $0.95 per mile) 2,280 Rush orders (6 rush orders at $145 per rush order) 670 Customer sales visits (3 sales calls at $135 per call) 405 Total costs Operating Income Help me solve this Etext pages Get more help . m m