Customer Profitability Analysis Colleen Company has gathered the following data pertaining to activities it performed for...
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Customer Profitability Analysis Colleen Company has gathered the following data pertaining to activities it performed for two of its major customers. Jerry, Inc. Kate Co. Number of orders 5 30 Units per order 1,000 200 Sales returns: Number of returns 2 5 Total units returned Number of sales calls 40 175 12 4 Colleen Company sells its products at $200 per unit. The firm's gross margin ratio is 25%. Both Jerry and Kate pay their accounts promptly and no accounts receivable is over 30 days. After using business analytics software to carefully analyze the operating data for the past 30 months, the firm has determined the following activity costs: Activity Cost Driver and Rate Sales calls $ 1,000 per visit Order processing 300 per order Deliveries 500 per order Sales returns Sales salary 100 per return and $5 per unit returned 100,000 per month Page 0174 Required 1. Using customers as the cost objects, classify the activity costs into cost categories (unit-level, batch-level, etc.) and compute the total cost for Colleen Company to service Jerry, Inc. and Kate Co. 2. Compare the profitability of these two customers. (Ignore the cost of funds.) Customer Profitability Analysis Colleen Company has gathered the following data pertaining to activities it performed for two of its major customers. Jerry, Inc. Kate Co. Number of orders 5 30 Units per order 1,000 200 Sales returns: Number of returns 2 5 Total units returned Number of sales calls 40 175 12 4 Colleen Company sells its products at $200 per unit. The firm's gross margin ratio is 25%. Both Jerry and Kate pay their accounts promptly and no accounts receivable is over 30 days. After using business analytics software to carefully analyze the operating data for the past 30 months, the firm has determined the following activity costs: Activity Cost Driver and Rate Sales calls $ 1,000 per visit Order processing 300 per order Deliveries 500 per order Sales returns Sales salary 100 per return and $5 per unit returned 100,000 per month Page 0174 Required 1. Using customers as the cost objects, classify the activity costs into cost categories (unit-level, batch-level, etc.) and compute the total cost for Colleen Company to service Jerry, Inc. and Kate Co. 2. Compare the profitability of these two customers. (Ignore the cost of funds.)
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Cost Management A Strategic Emphasis
ISBN: 978-0078025532
6th edition
Authors: Edward Blocher, David Stout, Paul Juras, Gary Cokins
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