Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Emery Company sells small machine parts to heavy equipment manufacturers for an average price of $ 1 . 3 0 per part. There are two

Emery Company sells small machine parts to heavy equipment manufacturers for an average price of $1.30 per part. There are two types of customers: those who place small, frequent orders and those who place larger, less frequent orders. Each time an order is placed and processed, a setup is required. Scheduling is also needed to coordinate the many different orders that come in and place demands on the plants manufacturing resources. Emery also inspects a sample of the products each time a batch is produced to ensure that the customers specifications have been met. Inspection takes essentially the same time regardless of the type of part being produced. Emerys Cost Accounting Department has provided the following budgeted data for customer-related activities and costs (the amounts expected for the coming year):
Frequently Ordering
Customers
Less Frequently
Ordering Customers
Sales orders 30,0003,000
Average order size 3,00030,000
Number of setups 35,2505,250
Scheduling hours 45,7505,250
Inspections 35,2505,250
Average unit cost* $0.7 $0.7
*This cost does not include the cost of the following "customer-related" activites:
Customer-related activity costs:
Processing sales orders $2,970,000
Scheduling production 1,377,000
Setting up equipment 4,374,000
Inspecting batches 5,832,000
Total $14,553,000
Required:
1. Assign the customer-related activity costs to each category of customers in proportion to the sales revenue earned by each customer type.
Sales revenue $
Customer-related activity costs $
Calculate the profitability of each customer type. (Because sales revenues for each customer type are equal, the profitability will be the same for each customer type.)
$
2. Assign the customer-related activity costs to each customer type using activity rates. Enter the appropriate activity rates below.
Processing sales orders $ per order
Scheduling production $ Per scheduling hour
Setting up equipment $ per setup
Inspecting batches $ per inspection
Calculate the profitability of each customer category.
Customer Profitability
Frequent $
Infrequent $

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Telecom Audit

Authors: M S. Mastel

1st Edition

0071410546, 9780071410540

More Books

Students also viewed these Accounting questions

Question

Describe the concept of diversity.

Answered: 1 week ago

Question

Summarize forecasting human resource availability.

Answered: 1 week ago