Crane Solutions, Inc. is an employment services firm that places both temporary and permanent workers with a variety of clients. Temporary placements account for 70% of Crane Solutions' revenue; permanent placements provide the remaining 30%. President Gia Johnson recently read an article that discussed the need to consider selling and administrative costs in determining customer profitability-a practice that Crane Solutions does not follow. Johnson is concerned that the company may be making poor choices in the selection of customers. In the temporary market. Crane Solutions advertises and searches for workers, hires them and pays them for the hours they work The company then bills customers for an amount that is higher than the workers' pay plus employment taxes. Because the temporary market is very competitive. Crane Solutions has had to reduce the rates charged to customers to keep their business. After reviewing the year's operations, Johnson has determined that the company's customer service activities for the temporary business could be divided into three cost pools:filling work orders, hiring temporary employees and processing payroll/billing customers. The following table shows the three cost pools and their annual capacity: Cost Pool Total Cost Annual Capacity Filling work orders $ 192,850 3.800 orders Hiring temporary employees $ 78,300 2.900 applicants Processing payroll/billing customers S 45.000 180,000 hours worked Crane Solutions' largest four customers account for about 52% of total sales, so Johnson has decided to analyze those customers' accounts first to determine how much they are contributing to the bottom line. The gross margin the companies generate and the activities they use are as follows: Chemical Company $466.733 Trailer Manufacturer $ 145,764 Newspaper Publisher $ 122,604 Food Processor $ 167,327 Sales Cost of sales Wages 341.620 110,473 92.205 120,451 Taxes and fees 65.366 24,350 18,621 23.411 Total cost of sales 406.986 134,823 110.826 143,862 Gross margin $59.747 $ 10,941 $11.778 $ 23,465 Temps ordered 87 50 924 332 Applicants 72 48 794 284 Hours worked 47.370 15.115 13,000 22.765 Your answer is correct Calculate the gross margin percentage for each customer. (Round answers to 1 decimal place, eg. 15.2%) Gross Margin% Chemical Company 128 96 Trailer Manufacturer 7.5 th % Newspaper Publisher 9.6 % Food Processor 14 96 Your answer is correct. Determine the activity rates for each of the three cost pools. (Round answers to 2 decimal places, eg. 15.25.) Cost Pool Activity Rate Filling workorders $ 50.75 per order Hiring temporary employees $ 27 per applicant Processing payroll/billing customers 25 per hour Determine the customer net profit and customer profit margin for each customer. (Round customer net profit to O decimal places, eg 125 and customer profit margin to 1 decimal place, eg. 15.2%. Enter negative amounts using either a negative sign preceding the number, es-45 or parentheses, es.(451) Customer net profit Customer profit margin Chemical Company $ X Trailer Manufacturer Newspaper Publisher $ 90 Food Processor 9
