Ramirez Wholesalers operates at capacity and sells furniture items to four department-store chains (customers). Mr. Ramirez commented, "We apply ABC to determine product-line profitability. The same ideas apply to customer profitability, and we should find out our customer profitability as well." Ramirez Wholesalers sends catalogs to corporate purchasing departments on a monthly basis. The customers are entitled to retun unsold merchandise within a six-month period from the purchase date and receive a full purchase price refund. The data that was collected from last year's operations and the activity rates Ramirez has calculated follow: |(Click the icon to view the activity rates.) E(Click the lcon to view the data.) Data Table Customers pay the transportation costs. The cost of goods sold averages 70% of net sales Requirement Determine the contribution to profit from each chain last year. Commer i Data Table Activity Cost-Driver Rate 36,400 23,800 Cost of goods sold Regular order processing $26 per regular order Gross margin 15,600 10,200 Rush order processing $130 per rush order Chain Customer related costs: Returned items processing $12 per item 1 2 3 4 1,430 Regular orders Catalogs and customer support $1,500 per customer 40,000 $ 1,950 Gross sales S 65,000 $ 125,000 S 85,000 Rush orders Retuned items 1,308 Sales returns: Print Done 1,500 Number of items 109 22 84 46 Catalogs and customer support 6,000 $ 7,500 Amount 13,000 8,750 S 6,188 Customer related costs Number of orders: $ 9,412 Contribution margin (loss) Regular 55 160 62 85 Rush 15 54 16 37 Enter any number in the edit fields and then click Check Answer. 6 parts remaining Print Done Check Answer Ramirez Wholesalers operates at capacity and sells furniture items to four department-store chains (customers). Mr. Ramirez commented, "We apply ABC to determine product-line profitability. The same ideas apply to customer profitability, and we should find out our customer profitability as well." Ramirez Wholesalers sends catalogs to corporate purchasing departments on a monthly basis. The customers are entitled to retun unsold merchandise within a six-month period from the purchase date and receive a full purchase price refund. The data that was collected from last year's operations and the activity rates Ramirez has calculated follow: |(Click the icon to view the activity rates.) E(Click the lcon to view the data.) Data Table Customers pay the transportation costs. The cost of goods sold averages 70% of net sales Requirement Determine the contribution to profit from each chain last year. Commer i Data Table Activity Cost-Driver Rate 36,400 23,800 Cost of goods sold Regular order processing $26 per regular order Gross margin 15,600 10,200 Rush order processing $130 per rush order Chain Customer related costs: Returned items processing $12 per item 1 2 3 4 1,430 Regular orders Catalogs and customer support $1,500 per customer 40,000 $ 1,950 Gross sales S 65,000 $ 125,000 S 85,000 Rush orders Retuned items 1,308 Sales returns: Print Done 1,500 Number of items 109 22 84 46 Catalogs and customer support 6,000 $ 7,500 Amount 13,000 8,750 S 6,188 Customer related costs Number of orders: $ 9,412 Contribution margin (loss) Regular 55 160 62 85 Rush 15 54 16 37 Enter any number in the edit fields and then click Check Answer. 6 parts remaining Print Done Check
