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Also, please provide the calculation formulas 33. Customer Profitability Analysis (L02, 5, 6) Roger's Acronautics, LTD, is a British acronautics subcontract company that designs and
Also, please provide the calculation formulas
33. Customer Profitability Analysis (L02, 5, 6) Roger's Acronautics, LTD, is a British acronautics subcontract company that designs and manufactures electronic control systems for com manufactured by Boeing in the U.S. and Airbus in Europe; however, there is a relatively small group of companies that manufacture narrow-body commercial jets. Assume for this exercise that Roger's does contract work for the two major manufacturers plus three companies in the second tier are control systems for commercial airlines. The vast majority of all commercial ai Because competition is intense in the industry, Roger's has always operated on a fairly thin 20% gross profit margin; hence, it is crucial that it manage non-manufacturing overhead costs effectively in order to achieve an acceptable net profit margin. With declining profit margins in recent years, Roger's Acronautics' CEO, Len Rogers, has become concerned that the cost of obtaining contracts and maintain- ing relations with its five major customers may be getting out of hand. You have been hired to conduct a customer profitability analysis. Roger's Aeronautics' non-manufacturing overhead consists of $2.5 million of general and admin- istrative (G&A) expense, (including, among other expenses, the CEO's salary and bonus and the cost of operating the company's corporate jet) and selling and customer support expenses of $3 million (includ- ing 5% sales commissions and $1 050,000 of additional costs). The accounting staff determined that the $1,050,000 of additional selling and customer support expenses related to the following four activity cost pools Cost per Unit Activity Cost Driver of Activity $1,400 1,200 1,600 1. Sales visits 2. Product adjustments Number of adjustments Number of calls/contacts ent events... Number of events Financial and activity data on the five customers follows (Sales and Gross Profit data in millions): Quantity of Sales and Support Activity Gross Customer Sales Profit Activity 1 Activity 2 Activity 3Activity 4 $17 $3.4 106 12 354 180 138 104 996 74 18 10 16 $39 $7.8 338 In addition to the above, the sales staff used the corporate jet at a cost of $800 per hour for trips to customers as followsStep by Step Solution
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