moodle.uowplatform.edu.au My SOLS Moodle.uowplatform.edu.au My SOLS Get Homework Hel..... + Site: ACCY312 (PN220) Management Accounting III https://moodle.uowplatform.edu.au/pluginfile.php/261774... Precision Manufacturing makes an electronic component called C424. This component is manufactured only when ordered by a customer, so Precision keeps no inventory of C424. The list price is $115 per unit, but customers who place large orders receive a 12% 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 10 days for free exchange or repair. The full cost of manufacturing a unit of C424 is $95. In addition, Precision incurs customer-level costs. Customer-level cost-driver rates are: Order taking Product handling Rush order processing Exchange and repair costs $360 per order $15 per case $560 per rush order $50 per unit Information about Precision's biggest customers are as follows: A B D 1,200 Number of units purchased Discount given 5,400 12% 1,800 12% 4,400 12% 8 Number of orders Number of cases Number of rush orders Number of units exchanged/repaired 16 180 6 72 540 1 14 52 120 1 16 8,100 12% on half the units 16 810 5 180 20 440 0 40 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. Required: (a) Calculate the customer-level operating income for these five customers. Prepare a customer- profitability analysis by ranking the customers from most to least profitable. (9 marks) (b) Discuss the results of your customer-profitability analysis. Does Precision have unprofitable customers? Is there anything Precision should do differently with its five customers? (7 marks) moodle.uowplatform.edu.au My SOLS Moodle.uowplatform.edu.au My SOLS Get Homework Hel..... + Site: ACCY312 (PN220) Management Accounting III https://moodle.uowplatform.edu.au/pluginfile.php/261774... Precision Manufacturing makes an electronic component called C424. This component is manufactured only when ordered by a customer, so Precision keeps no inventory of C424. The list price is $115 per unit, but customers who place large orders receive a 12% 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 10 days for free exchange or repair. The full cost of manufacturing a unit of C424 is $95. In addition, Precision incurs customer-level costs. Customer-level cost-driver rates are: Order taking Product handling Rush order processing Exchange and repair costs $360 per order $15 per case $560 per rush order $50 per unit Information about Precision's biggest customers are as follows: A B D 1,200 Number of units purchased Discount given 5,400 12% 1,800 12% 4,400 12% 8 Number of orders Number of cases Number of rush orders Number of units exchanged/repaired 16 180 6 72 540 1 14 52 120 1 16 8,100 12% on half the units 16 810 5 180 20 440 0 40 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. Required: (a) Calculate the customer-level operating income for these five customers. Prepare a customer- profitability analysis by ranking the customers from most to least profitable. (9 marks) (b) Discuss the results of your customer-profitability analysis. Does Precision have unprofitable customers? Is there anything Precision should do differently with its five customers? (7 marks)
