Prepare using Excel. Fresno Fiber Optics, Inc. manufactures fiber optic cables for the computer and telecommunications industries. At the request of the company vice president of marketing, the cost management staff has recently completed a customer-profitability study. The following activity-based costing information was the basis for the analysis.

Customer-Related Activities Cost Driver Base Cost Driver Rate

Sales activity ................................................. Sales visits ................................................. $1,000

Order taking ................................................. Purchase orders ........................................ $200

Special handling ........................................... Units handled ........................................... $50

Special shipping ........................................... Shipments .................................................. $500

Cost-driver data for two of Fresnos customers for the most recent year are

Customer-Related Activities Trace Telecom Caltex Computer

Sales activity .................................................. 8 visits ...................................................... 6 visits

Order taking .................................................. 15 orders .................................................... 20 orders

Special handling ............................................ 800 units handled ........................................ 600 units handled

Special shipping ............................................ 18 shipments ............................................. 20 shipments

The following additional information has been compiled for Fresno Fiber Optics for two of its customers, Trace Telecom and Caltex Computer, for the most recent year:

Trace Telecom Caltex Computer

Sales revenue ...............................................$190,000 ...............................................$123,800

Cost of goods sold ....................................... 80,000 ...............................................62,000

General selling costs .................................... 24,000 ...............................................18,000

General administrative costs ....................... 19,000 ...............................................16,000

Required:

1. Prepare Fresno Fiber Optics customer profitability profile for the most recent year.

2. As Fresno Fiber Optics director of cost management, write a memo to the companys vice president of marketing that will accompany the customer profitability profile. Include a brief explanation of the methodology used and comment on the results.