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Question 1 Aston Fuels Ltd is an established medium-sized energy company that recently started a Biofuels department to sell and build biomass processing plants. They
Question 1 Aston Fuels Ltd is an established medium-sized energy company that recently started a Biofuels department to sell and build biomass processing plants. They started the department after inventing a new technology to convert biomass into biofuels, which they believe is more efficient than existing systems. The department's target customers are companies that produce and sell biofuels. They have been selling their processing plants for one year, and now want to understand how profitable their biggest customers are. Aston Fuels Ltd has hired you as a consultant to offer advice, and they have provided the following information. Customer Acran Biodrive Calsan 1 8 16 450,000 450,000 450,000 12% 2% 17% 1 24 6 Plants sold List selling price Discount on list price Change of Specifications (before construction) Total number of Sales Visits Total number of Deliveries Change of Specifications (during construction) Km per Delivery 2 16 12 2 15 19 1 7 3 85 275 400 Required a) Your manager has asked you to use the following cost drivers and allocation rates to conduct a customer profitability analysis. Tabulate your results: Activity Change of Specifications (before construction) Sales visits Delivery Change of Specifications (during construction) Construction costs Cost driver and rate 45,000 per Change of Specification (before construction) 1,500 per Sales Visit 250 per km travelled 60,000 per Change of Specifications (during construction) 200,000 per Plant sold b) Based on your calculations and the other information provided, advise Aston Fuels Ltd on how it could improve its profitability
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