Question
Power Corporation sells a line of power tools to home improvement chains, generating a cost of goods sold equal to 50% of net sales. The
Power Corporation sells a line of power tools to home improvement chains, generating a cost of goods sold equal to 50% of net sales. The selected data that follow relate to the period just ended for the company's three largest customers: Weekend Project, Tool Mart, and Fix-It City.
Power's management recently attended a seminar and learned that customers with excessive requests and demands can have a significant, negative impact on corporate profitability.
Gross sales volume:
Dollars $ 1,960,000 $ 4,820,000 $ 5,000,800
Number of Orders 50 183 133
Type of order:
Regular 36 139 114
Rush 14 44 19
Sales returns:
Dollars $ 104,000 $ 394,000 $ 244,000
Number of returns 7 24 12
Total customer-related costs $ 249,000 $ 899,000 $ 448,000
Required:
For each of the three chains, compute: (For Requirement 1, 3-4, round your answers to 2 decimal places. Round "Average order size" to the nearest whole number.)
1. Total customer-related costs as a percentage of gross margin.
2. The average order size (ignoring sales returns).
3. The ratio of regular orders to rush orders.
4. The number of sales returns as a percentage of the number of total orders.
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