Question
Being competitive in the business world today Gemilang Technology, a local fibre optics manufacturer, is so committed to adopting a strategic management system. Using an
Being competitive in the business world today Gemilang Technology, a local fibre optics manufacturer, is so committed to adopting a strategic management system. Using an activity-based approach, the Company ensures that all processes and activities undertaken to add value to the business, including the service aspects related to the Company's suppliers and customers. To evaluate the customer profitability, the following information about two of the Company's customers, UDA Holdings Berhad and DARA Enterprise, are gathered: UDA Holdings Berhad Dara Enterprise Sales Revenue RM380 000 RM247 600 Cost of Goods Sold 160 000 124 000 Sales Expense 48 000 36 000 Administration Expense 38 000 32 000 Customer Related Activities Sales Activity 8 sales visits 6 sales visits Purchase Order 15 purchase orders 20 purchase orders Special Handling Special Delivery 800 operating units 18 shipments 600 operating units 20 shipments Customer profitability analysis was based on the following cost information: Customer Related Activities Cost Drivers Rate Sales Activity Sales visit RM2,000 Purchase Order Purchase order 400 Special Handling Special Delivery Operating unit Total shipment 100 1,000 Required:
a) Discuss the importance of value-added for the functioning of a business. (3 Marks)
b) Describe how activity-based management and activity-based costing systems differ. How does the activity-based method help in analysing customer profitability? (5 marks)
c) Provide the customer profitability analysis for UDA Holdings Berhad and Dara Enterprise. Critically evaluate both customers' performance advantages.
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