question 13

Sorbent Cheesecake Company supplies Cheesecakes to three large supermarket chains throughout Australia. Management has become concerned about the rising costs associated with the processing and dispatch of orders. An activity analysis of the indirect costs identied the following customer-related costs. Supermarket customer . Total . . Estimated ActIVIty cost Cost driver indirect expected use A B C pool of cost costs , driver* Orders processing Number of orders $270,000 650 350 200 100 Returns processing Number of returns $ 90,000 170 100 30 40 Delivery Number of deliveries $170,000 770 370 250 150 Rush orders Number of rush orders $ 95,000 90 40 25 25 Sales visits Number of visits $ 45,000 150 50 50 50 *Expressed in units of measure of the driver. Sales are marked up 50 per cent on cost. Required a) Calculate the activity cost rate for each activity. (2 Marks) b) Assign the activity costs to each of the three customers. (2 Marks) 0) Calculate the gross contribution and net contribution for each customer and rank them from high to low. The sales pattern for each customer is: CustomerA - $975,000; Customer B - $495,000; Customer C - $770,000. (2 Marks) d) Advise the management of the Sorbent Cheesecake Company as to whether any changes should be made in its relationships with customers. (4 Marks)