Question
Problem 5-65 should be prepared using Excel. Please note, you must show your work in Excel, which includes providing the formulas in the cells, not
Problem 5-65 should be prepared using Excel. Please note, you must show your work in Excel, which includes providing the formulas in the cells, not just the summary value.
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 cus-tomers, 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.
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