eBook Show Me How Activity-Based Costing and Customer Profitability Schneider Electric manufactures power distribution equipment for commercial customers, such as hospitals and manufacturers. Activity- based costing was used to determine customer profitability. Customer service activities were assigned to Individual customers, using the following assumed customer service activities, activity base, and activity rate: Activity Base Number of bid requests Customer Service Activity Bid preparation Shipment Support standard items Support nonstandard items Number of shipments Number of standard Items ordered Number of nonstandard items ordered Activity Rate $400 per request $ 80 per shipment $ 25 per std. item $150 per nonstd. Item Assume that the company had the following gross profit information for three representative customers: Customer 1 Customer 2 $120,000 Revenues Cost of goods sold Gross profit Gross profit as a percent of sales Customer 3 $160,000 83,200 $76,800 $200,000 110,000 $90,000 45% 76,800 543,200 36% 48% The administrative records indicated that the activity-base usage quantities for each customer were as follows: Customer 1 Customer 2 Customer 3 14 38 55 30 60 48 Activity Base Number of bld requests Number of shipments Number of standard items ordered Number of nonstandard Items ordered 15 30 50 5 70 80 a. Prepare a customer profitability report dated for the year ended December 31, 2018, showing (1) the income from operations after customer service activities, (2) the gross profit as a percent of sales, and (3) the income from operations after customer service activities as a percent of sales. Prepare the report with a column for each customer. Round percentages to the nearest whole percent. Enter all amounts as positive numbers. Schneider Electric Previous Next > Check My Work ted eBook 34 Show Me How 30 60 48 15 30 50 Number of shipments Number of standard items ordered Number of nonstandard items ordered 5 70 80 a. Prepare a customer profitability report dated for the year ended December 31, 2048, showing (1) the income from operations after customer service activities, (2) the gross profit as a percent of sales, and (3) the income from operations after customer service activities as a percent of sales. Prepare the report with a column for each customer. Round percentages to the nearest whole percent. Enter all amounts as positive numbers. Schneider Electric Customer Profitability Report For the Year Ended December 31, 2018 Customer 1 Customer 2 Customer 3 Revenues Cost of goods sold Gross profit Customer service activities: Bid preparation Shipment Support standard items ind ind lud quoddl Support nonstandard Items Total customer service activities Income from operations after customer service activities Gross profit as a percent of sales Income from operations after customer service activities as a percent of sales b. Interpret the report in part (a). The gross profit as a percent of sales indicated that was the least profitable, while was the most profitable. After deducting the activity costs associated with customer service activities, became the least profitable, while became nearly as profitable as Customer 2. The reason is because consumed much more customer service activities than did the other customers. Apparently, ordered nonstandard products that required specialized bid requests. In addition, required more shipments, indicating smaller shipments to a customer's location, rather than a few large shipments. Previous Next > Check My Work All work saved Save and Et Submit Assignment for Grading eBook Show Me How Activity-Based Costing and Customer Profitability Schneider Electric manufactures power distribution equipment for commercial customers, such as hospitals and manufacturers. Activity- based costing was used to determine customer profitability. Customer service activities were assigned to Individual customers, using the following assumed customer service activities, activity base, and activity rate: Activity Base Number of bid requests Customer Service Activity Bid preparation Shipment Support standard items Support nonstandard items Number of shipments Number of standard Items ordered Number of nonstandard items ordered Activity Rate $400 per request $ 80 per shipment $ 25 per std. item $150 per nonstd. Item Assume that the company had the following gross profit information for three representative customers: Customer 1 Customer 2 $120,000 Revenues Cost of goods sold Gross profit Gross profit as a percent of sales Customer 3 $160,000 83,200 $76,800 $200,000 110,000 $90,000 45% 76,800 543,200 36% 48% The administrative records indicated that the activity-base usage quantities for each customer were as follows: Customer 1 Customer 2 Customer 3 14 38 55 30 60 48 Activity Base Number of bld requests Number of shipments Number of standard items ordered Number of nonstandard Items ordered 15 30 50 5 70 80 a. Prepare a customer profitability report dated for the year ended December 31, 2018, showing (1) the income from operations after customer service activities, (2) the gross profit as a percent of sales, and (3) the income from operations after customer service activities as a percent of sales. Prepare the report with a column for each customer. Round percentages to the nearest whole percent. Enter all amounts as positive numbers. Schneider Electric Previous Next > Check My Work ted eBook 34 Show Me How 30 60 48 15 30 50 Number of shipments Number of standard items ordered Number of nonstandard items ordered 5 70 80 a. Prepare a customer profitability report dated for the year ended December 31, 2048, showing (1) the income from operations after customer service activities, (2) the gross profit as a percent of sales, and (3) the income from operations after customer service activities as a percent of sales. Prepare the report with a column for each customer. Round percentages to the nearest whole percent. Enter all amounts as positive numbers. Schneider Electric Customer Profitability Report For the Year Ended December 31, 2018 Customer 1 Customer 2 Customer 3 Revenues Cost of goods sold Gross profit Customer service activities: Bid preparation Shipment Support standard items ind ind lud quoddl Support nonstandard Items Total customer service activities Income from operations after customer service activities Gross profit as a percent of sales Income from operations after customer service activities as a percent of sales b. Interpret the report in part (a). The gross profit as a percent of sales indicated that was the least profitable, while was the most profitable. After deducting the activity costs associated with customer service activities, became the least profitable, while became nearly as profitable as Customer 2. The reason is because consumed much more customer service activities than did the other customers. Apparently, ordered nonstandard products that required specialized bid requests. In addition, required more shipments, indicating smaller shipments to a customer's location, rather than a few large shipments. Previous Next > Check My Work All work saved Save and Et Submit Assignment for Grading