QUESTION: Gynriostsehetl Inc is a major distributor of medical equipment based in Seattle, Washington. The company purchases the medical equipment from a wholesaler, (terms 2/10, n/30 FOB shipping point) and resells them to hospitals and other Health Care providers all over the Pacific Northwest (the wholesaler buys the equipment from an overseas manufacturer). The company has built a reputation of quick delivery time, and has an owned fleet of vehicles that deliver equipment to customers. The equipment sold range in size from heavy machines for hospitals to small equipment (tool type and supplies) for hospitals, dental clinics, and medical massage parlors. Gynriostsehetl Inc sets all its prices for all customers by marking up its cost of goods sold to those hospitals by 31 %. For example, if a customer buys equipment (supplies) that had cost $100, Gynriostsehetl Inc would charge the customer $131. The margin seemed sufficient in the past, but with rising costs, and inability to increase selling prices due to competition, the company is looking for ways to reduce its costs. The company broke its selling and administrative expenses into five activities (cost pools) as shown below (for the year 2016): Activities Cost Pool Customer Deliveries Order Processing Customer support Rebilling & Collections Activity Measure Number of deliveries Number of orders Number of customers Number of Rebilling & Collection Hours (BCHS) NA Total Cost $1,980,000 $1,620,000 $840,000 $1,800,000 Total Activity 14,400 deliveries 21,600 orders 600 customers 7,200 BCHS Other (Organization sustaining & idle capacity) Total Selling & Administrative Expenses $1,760,000 $8,000,000 ADDITIONAL INFORMATION ON COST POOLS Customer Deliveries see above Order processing - including costs associated with resources used in order taking and data entry, picking, sorting, weighting, labeling, packing, consolidation, loading, and tracking. About 72% of all customers order electronically with the rest ordering manually. All this is managed in-house by employees of Gynriostsehet! Customer Support - includes installation at customer sites and training customers on how to install / assemble and perform routine maintenance; troubleshooting either on the phone or on customer's site; returns and refunds; etc. Rebilling and Collections - costs associated with issuing new statements and invoices for overdue amounts, telephone calls to overdue customers, meeting with overdue customers, attorney fees for litigation dealing with overdue customers, etc. Other - as noted above, this cost pool includes organization sustaining costs as well as costs associated with idle capacity. + 179 The accounting department has computed the following activity rates: CUSTOMER ORDER CUSTOMER REBILLING & OTHER DELIVERIES PROCESSING SUPPORT COLLECTIONS Costs allocated $1,980,000 $992,400 $840,000 $1,800,000 $2,387,600 Units of Cost driver 14,400 1,200 600 7,200 NA Activity rate $137.50 per $827 per order $1,400 per customer $250 per BCH NA delivery The company has three major customer classifications, Large & Midsized Hospitals, Dentistry Firms, and Medical Massage Parlors all with very different purchasing behaviors as shown in the table below (for the year 2016): Attribute Large & Midsized Dentistry Firms Medical Massage Parlors Hospitals Number of Customers 27 394 Average Payment Timing 50% in advance; 50% 30 100% 30 days after delivery Intermittent - see note (#) days after delivery below Payment Mode EFT (Electronic funds 75% EFT, 25% checks 1% EFT; 82% checks; 17% transfer) cash Orders made 648 orders 8,500 orders 12,360 orders Deliveries made 324 deliveries 6,444 deliveries 7,632 deliveries Rebilling & Collection Hours O BCHS 1,800 BCHS 5,400 BCHS The accounting department has also completed a customer segment profitability analysis (using ABC Costing) as shown below: LARGE & DENTISTRY MEDICAL MIDSIZED MASSAGE TOTAL HOSPITALS FIRMS PARLORS Sales $ 42,444,000 $14,538,380 $ 4,129,120 $ 61,111,500 Less: Product Costs Cost Of Goods Sold 32,400,000 11,098,000 3,152,000 46,650,000 Customer Deliveries 44,550 886,050 1,049,400 1,980,000 Order Processing 48,600 644,400 927,000 1,620,000 Customer Support 37,800 250,600 551,600 840,000 Rebilling & Collections 450,000 1,350,000 1.800,000 Total Product Costs 32,530,950 13,329,050 7,030,000 52,890,000 Customer Margin $ 9,913,050 $ 1,209,330 S (2,900,880) $ 8,221,500 Customer Margin % 23.36% 8.32% -70.25% 13.45% Organization Sustaining $1,760,000 Net Operating Income $ 6,461,500 Net Operating Income % 10.57% #: Customers in the Medical Passage Parlors category have intermittent payment behavior, with most of their payments received past the due dates. REQUIRED: Based on all the above data and information, what SPECIFIC and PRACTICAL recommendations or suggestions would you provide management of this company. Note: No calculations needed - all calculations have been completed above for you. [[This is not a question that you can answer in a simple paragraph; you will need to provide at least FIVE plausible recommendations {at least five short paragraphs}]] Support your answers with applicable sources. Posts without appropriate citations will NOT be graded. Note: Discussion entries and comments must be substantive and detailed. Hint: Do not limit yourself to the textbook; utilize (and cite) online resources