Apsung Ltd produces and sells the .55 mobile phone with three models in the range, the AS15, .5525 and the 5535. In the UK Apsung Ltd sells via its own stores located in all major cities as well as to the electronics superstore CPW World. To encourage CPW World to stock the phones a substantial trade discount has been agreed. In addition, Apsung Ltd sells the phones directly to customers online of which T535 of these sales relate to the UK with the remainder sold overseas. The latest income statements for Apsung Ltd are detailed below. 5515 A525 F1535 Total '555 '555 '555 '555 Sales Revenue 1 T3? 2 555 1 155 5 2'55 'v'ariable Manufacturing |Costs 535 555 1,222 2,55? Trade Discounts 25 25 25 T5 5a|esforce commission costs E g E E Total costs E E E 2 554 Contribution 1 15? 1 545 {1211 2 555 Fixed manufacturing costs 155 352 352 555 Sales and marketing costs 232 Administration costs Net Income 1 ,535 553 1,?55 Apsung Ltd want to understand the protability of their products when sold via the different routes to market, particularlyr as the 5535 has a negative contribution and have provided the following information relating to sales: i} The company's own stores account for 55% of the total sales revenue and these are split between the A515, A525 and A535 in the proportions 315:2. ii) CPW World are a growing source of income and now account for 25% of the total sales revenue. Theirr sell 51 15,555 of the 5535 and sales of the 5515 are double this amount. The balance of their sales relate to the .5525. iii} The online UK sales have the same breakdown by product as seen in their own stores. iv} The balance of sales by product relates to the online overseas customers. In addition: v) The price of each type of product is the same for all customers. vi} 1|lilariable costs can be allocated to products in the same percentage per product as shown in the income statement. vii) Trade discounts are onlyr given to CPW World. viii} 5a|es commission is 1.25% of selling price. is} Fixed manufacturing costs should be allocated to customers based on sales value of each product. X} Sales and marketing costs as well as administration costs should be allocated to Home Stores, CPW World, UK online and Overseas online in the proportion 3:2:2:1. 4 (continued) Required: a) Prepare a detailed customer profitability analysis for Apsung Ltd by customer group. (14 marks) b) Analyse the results provided for Apsung Lid as well as your own results calculated in part a). Include any advice that you think might be important for Apsung Ltd to consider. (6 marks)
