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Homework 1 ABC, wholesale, customer profitability. Veritek Wholesalers operates at capacity and sells furniture items to four department-store chains (customers). Mr. Veritek commented, We apply
Homework 1 ABC, wholesale, customer profitability. Veritek Wholesalers operates at capacity and sells furniture items to four department-store chains (customers). Mr. Veritek commented, We apply ABC to determine product-line profitability. The same ideas apply to customer profitability, and we should find out our customer profitability as well. Veritek Wholesalers sends catalogs to corporate purchasing departments on a monthly basis. The customers are entitled to return unsold merchandise within a six-month period from the purchase date and receive a full purchase price refund. Veritek has calculated the following activity rates: | |||||||
Overhead activities | Cost-Driver Rate | ||||||
Regular order processing | $ 30.00 | per regular order | |||||
Rush order processing | $ 150.00 | per rush order | |||||
Returned item processing | $ 15.00 | per item sold | |||||
Catalogs and customer support | $ 1,200.00 | per customer | |||||
The following data were collected from last years operations: | |||||||
Operations data | Customer 1 | Customer 2 | Customer 3 | Customer 4 | |||
Gross sales | $ 40,000 | $ 20,000 | $ 110,000 | $ 95,000 | |||
Sales returns: | |||||||
Number of items | 96 | 24 | 64 | 32 | |||
Amount | $ 8,000 | $ 3,000 | $ 7,700 | $ 9,000 | |||
Number of orders | |||||||
Regular | 30 | 140 | 55 | 100 | |||
Rush | 8 | 46 | 12 | 45 | |||
Required Customers pay the transportation costs. The cost of goods sold averages 75% of sales. Determine the contribution to profit from each customer last year. Comment on your solution. Do a single costing system and ABC system. Comment on findings |
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