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Medford Manufacturing makes a component called B2040. This component is manufactured only when ordered by a customer, so Mississippi keeps no inventory of B2040. The
Medford Manufacturing makes a component called B2040. This component is manufactured only when ordered by a customer, so Mississippi keeps no inventory of B2040. The list price is $122 per unit, but customers who place "large" orders receive a 8% discount on price. The customers are manufacturing firms. Currently, the salespeople decide whether an order is large enough to qualify for the discount. When the product is finished, it is packed in cases of 10 . If the component needs to be exchanged or repaired, customers can come back within 14 days for free exchange or repair. (Click the icon to view the data. (Click the icon to view the activities and cost drivers.) Information about Medford's five biggest customers follows: All customers except E ordered units in the same order size. Customer E's order quantity varied, so E got a discount part of the time but not all the time. Data table The full cost of manufacturing a unit of B2040 is $98. In addition, Medford incurs customer-level costs. Customer-level cost-driver rates are shown below: Requirement 1. Calculate the customer-level operating income for these five customers. Use the format provided. Prepare a customer-profitability analysis by ranking the customers from most to least profitable. Begin by calculating the customer-level operating income for these five customers. (For accounts with a $0 balance, make sure to enter "0" in the appropriate cell. Use parentheses or a minus sign when entering operating losses.) Rank the customers in order of most to least profitable and prepare a customer-profitability analysis in terms of operating income. (Use parentheses or a minus sign when entering negative numbers and losses. Enter percents rounded to two decimal places, X.XX%) Requirement 2 . Discuss the results of your customer-profitability analysis. Does Medford have unprofitable customers? Is there anything Medford should do differently with its five customers? , Medford have unprofitable customers. Operating losses are being reported by Customer B and Customer C. The least profitable customer is customer Select the statements that indicate actions that Medford should take. If customer B were not being given price discounts, B would be profitable. Discounts should be offered for large orders only. If customer C were not being given price discounts, C would be profitable. Discounts should be offered for large orders. The cost of rush order processing is high. The company should work to reduce theses costs or the number of rush orders. The cost of product handling is high. The company should work to reduce these costs. The most profitable customers (A and E ) are valued customers and should receive the highest level of customer service
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