Costs of Different Customer Classes Kaune Food Products Company manufactures canned mixed nuts with an average manufacturing cost of $48 per case (a case contains 24 cans of nuts). Kaune sold 157,000 cases last year to the following three classes of customer: Price Cases per Sold Customer Case Supermarkets 80,000 $59 94 Small grocers - 47,000 Convenience stores 30,000 The supermarkets require special labeling on each can costing $0.02 per can. They order through electronic data interchange (EDI), which costs Kaune about $60,000 annually in operating expenses and depreciation. Kaune delivers the nuts to the stores and stocks them on the shelves. This distribution costs $40,000 per year. The small grocers order in smaller lots that require special picking and packing in the factory; the special handling adds $20 to the cost of each case sold. Sales commissions to the independent jobbers who sell Kaune products to the grocers average 6 percent of sales. Bad debts expense amounts to 7 percent of sales. Convenience stores also require special handling that costs $29 per case. In addition, Kaune is required to co-pay advertising costs with the convenience stores at a cost of $18,000 per year. Frequent stops are made to each convenience store by Kaune delivery trucks at a cost of $24,000 per year. Costs of Different Customer Classes Kaune Food Products Company manufactures canned mixed nuts with an average manufacturing cost of $48 per case (a case contains 24 cans of nuts). Kaune sold 157,000 cases last year to the following three classes of customer: Price Cases per Sold Customer Case Supermarkets 80,000 $59 94 Small grocers - 47,000 Convenience stores 30,000 The supermarkets require special labeling on each can costing $0.02 per can. They order through electronic data interchange (EDI), which costs Kaune about $60,000 annually in operating expenses and depreciation. Kaune delivers the nuts to the stores and stocks them on the shelves. This distribution costs $40,000 per year. The small grocers order in smaller lots that require special picking and packing in the factory; the special handling adds $20 to the cost of each case sold. Sales commissions to the independent jobbers who sell Kaune products to the grocers average 6 percent of sales. Bad debts expense amounts to 7 percent of sales. Convenience stores also require special handling that costs $29 per case. In addition, Kaune is required to co-pay advertising costs with the convenience stores at a cost of $18,000 per year. Frequent stops are made to each convenience store by Kaune delivery trucks at a cost of $24,000 per year
