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Exercise 8-18 Laramie Corporation has analyzed its customer and order handling data for the past year and has determined the following costs: Order processing cost
Exercise 8-18 Laramie Corporation has analyzed its customer and order handling data for the past year and has determined the following costs: Order processing cost per order $ 9 Additional costs if order must be expedited (rushed) $ 11 Customer technical support calls (per call) $ 13 Relationship management costs (per customer per year) $ 1,920 In addition to these costs, product costs amount to 76 percent of sales. In the prior year, Laramie had the following experience with one of its customers, the Julius Company: Sales Number of orders Percent of orders marked rush Calls to technical support $24,100 170 80% 87 For the coming year, Laramie Corporation has told the Julius Company that it will be switched to an activity- based pricing system or it will be dropped as a customer. In addition to regular prices, Julius will be required to pay: Order processing (per order) Additional handling costs if order marked rush (per order) Technical support calls (per call) $10 $21 $21 Calculate the profitability of the Julius Company account if activity is the same as in the prior year. (Enter loss using either a negative sign preceding the number e.g.-45 or parentheses e.g. (45).) Profit/ (Loss) s LINK TO TEXT
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