Question
Aqua Distributors Activity Part 1: Customer Profitability Aqua Distribution buys bottled water at $12 per case and sells it to retail clients. Data pertaining to
Aqua Distributors Activity
Part 1: Customer Profitability
Aqua Distribution buys bottled water at $12 per case and sells it to retail clients. Data pertaining to four customers is as follows:
Williams | Perez | Schmidt | |
Cases Sold | 62,000 | 32,000 | 4,000 |
Actual price per case | $13.20 | $13.80 | $12.95 |
Number of orders | 30 | 25 | 30 |
Customer Visits | 6 | 2 | 3 |
Deliveries | 60 | 40 | 20 |
Miles per Delivery | 3 | 8 | 40 |
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The firm estimates the following rates:
Number of orders | $200 per order |
Customer Visits | $120 per visit |
Delivery | $2 per delivery mile traveled |
Product Handling | $.50 per case sold |
Required:
1.) Evaluate customer profitability and suggest ways that Aqua might improve its profitability. Use excel for all your calculations.
Part 2: Segment Profitability
Aqua Distributions has 2 locations one in Des Moines and one in Kansas City. Information relating to the locations is detailed below.
| Aqua Distributions | Des Moines | Kansas City |
Revenue | $2,000,000 | $1,200,000 | $800,000 |
Variable Costs | $1,460,000 | $900,000 | $560,000 |
Contribution Margin | $540,000 | $300,000 | $240,000 |
Traceable Fixed Costs | $180,000 | $70,000 | $110,000 |
Segment Margin | $360,000 | $230,000 | $130,000 |
Common Fixed Costs | $200,000 |
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Net Operating Income | $160,000 |
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1.) Aqua believes they can increase sales in the Des Moines market next year by $300,000. Prepare a new segmented income statement. Assume cost behaviors and fixed costs will remain the same.
2.) Calculate the companywide break-even point.
3.) Calculate the break-even point for the Kansas City location.
4.) Calculate the break-even point for the Des Moines location.
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