Read the given data and tables and then answer the given two questions ASAP.

Tables:

(Table 4 is divided into 2 screenshots)

Questions:

Seven Flags Manufacturing BACKGROUND: Seven Flags Manufacturing is one of a dozen companies that produces and sells towels for the U.S. "sports towel" market. A "sports towei" is a towel that has the promotion of an event or a logo printed on it. They're called sports towels because their most popular use is for distribution in connection with major sporting events such as the Super Bowl, NCAA Final Four, Augusta National Golf Tournament and the U.S. Open Tennis Tournament. Towels with college, NBA and NFL team logos, and promotions for commercial products such as soft drinks, beer, fast food chains, etc., are also big sellers. The firm designs, knits, prints and embroiders towels. The firm knits all the towels it sells and tracks costs for towel production separately from the cost to customize the towels. Seventy-five percent of its orders include logo design, while the balance are print only and require the payment of a license fee for the logo used. However, about 15% of its orders include embroidery. Towels are made in three sizes: regular (18" x 30"), hand (12" x 20") and mid-range (15" 24"). The normal production cycle for an order of white towels is three days. If a customer wants a colored towel, the basic white towel made by Seven Flags is sent to a dyeing firm, which extends the production cycle of an order by three days. Also, occasionally, customers order towels in sizes other than the three standard sizes. These towels are called "special" The firm now produces a "medium" quality towel. They have had some difficulty with the "staying power" of the material printed on these towels, which is attributed to the towel quality, the ink and the printing process. Customers have complained that the ink "lays on the surface" and it cracks and peels off. Seven Flags recently made a break-through in developing an ink that soaks into the towel, won't wash out and is non-toxic. A big advantage of this ink is that it avoids EPA disposal requirements because is can be "washed down the drain". Due to these characteristics of its new ink, Seven Flags is considering upgrading the quality of the basic towel it produces because it will "take" the ink better, both the towel and the ink will last longer and the product will sell at a higher price. If it takes this step, the company will evaluate expanding its marketing and sales area with the objective of "going national". CUSTOMERS: Except for a few non-regional chains, Seven Flags' sales are predominantly in the southeastern states. The company sells its products to 986 different customers. These customers differ primarily in the volume of their purchases, so management classifies each customer in one of three groups: large (8 customers), medium (154 customers) and small (824 customers). Large customers are primarily national chains, small customers are single store operations (including pro shops at golf courses) and medium-sized customers are small chains, large single stores or licensing agents for professional sports teams and manufacturers of consumer products. Table 1 gives the product and customer size statistics for 2001 Seven Flags has a different approach to customers in each of its three categories. A small group of in-house sales people sell directly to buyers in the large customer category. Independent manufacturer representatives, on commission, call on the license holder or the manager of a store in the medium customer category. Ads placed in regional and national magazines and newspapers target customers primarily in the small customer segment, who call or mail in their orders Seven Flags does not give discounts and it ships all order free on board (FOB) point of origin, i.e., customers pay their freight costs. MANUFACTURING: Seven Flags has a modern knitting and printing plant in the foothills of North Carolina's Seven Flags Mountains. Upgrading the facilities over recent years was accompanied by the introduction of an activity-based costing (ABC) system to determine product costs. The cost accounting system is fairly sophisticated and management has confidence in the accuracy of the manufacturing cost figures for each product line. Table 2 shows the firm's unit costs for various items. Company management is committed to adopting advanced manufacturing techniques such as benchmarking and just-in-time (JIT) The corporate culture necessary for the success of such techniques is evolving and worker empowerment is already a major program In addition, workers are allowed several hours away from regular work assignments each week for training programs conferring on budgets and work improvements and applying the ABC system PERFORMANCE: Select o to take a screens The company is profitable. However, management has become concerned about the profitability of the customers in its three customer-size categories_large, medium and small Different custom Management has no basis for identifying customers that generate high profits or to drop those that do not generate enough revenues to cover the expenses to support them Under the previous a determine the costs of supporting individual customers. With the introduction of ABC, it now may be possible to determine customer profitability. Table 3 shows how the administrative and selling costs are assigned and re-assigned between variou areas and to sub activities in the selling and marketing areas. Table 4 provides a list of selling and marketing activities and the activity base to use in assigning costs to each. TABLE 1 SEVEN FLAGS MANUFACTURING Sales Information Product and Customer Size Statistics Sales in Units by Customer Account Size Large Medium Small Total Towel: Regular 27,250 16,600 10,550 54,400 Mid-Size 36,640 18,552 10,308 65,500 Hand 35,880 19,966 95,954 151,800 Special 480 3,426 594 4,500 Number of Units Sold 100,250 58,544 117,406 276,200 Number of Units Embroidered 5,959 6,490 29,394 41,842 Number of Units Dyed 20,536 9,935 12,328 42,798 Sales Volume Revenue $308,762 $183,744 $318,024 $810,530 Number of Orders Received 133 845 5,130 6,108 Number of Shipments Made 135 923 5,443 6,501 Number of Invoices Sent 112 754 4,737 5,603 Accounts with Balance >60 Days 1 11 122 134 TABLE 2 SEVEN FLAGS MANUFACTURING Unit Cost Information Line 1 Direct Manufacturing Costs Per Unit Quantity Sales Price Material Labor Overhead Unit Cost Towels: Regular 54,400 $3.60 50.60 $0.37 $0.22 $1.19 Mid-Size 65,500 3.20 0.50 0.33 0.20 1.03 Hand 151,800 2.55 0.39 0.31 0.19 0.89 Special 4,500 4.00 0.67 0.48 0.29 1.44 Line 2 Direct Costs of Customizing Per Unit Quantity Cost Material Labor Overhead Total Inking (based on passes) 552,400 $0.0030 $0.0045 $0.0742 50.0817 Dyeing 42,798 S0.11 0.0000 0.1100 Embroidery 41,842 0.0026 0.1750 1.0994 1.2770 Direct Labor Wage Rate: $9.00 (Including Fringes) Inking requires one pass for each color used; average two colors per towel (i.e., 2 per unit), and is used on all towels. 9:09 Owl 95% I QU SEVEN FLAGS MANUFACTURING Selling and Administrative Costs and Activities Costs Incurred in Each Function (Shipping, Sales, Marketing) Directly Assigned to: Total Total Shipping Sales Marketing Other Assigned Unassigned Administration$170,000 17,000 $ 37,400 $20,400 $56,100 $130,900 $39,100* Selling 155,000 15,500 117.800 9.300 12.400 155,000 $325,000$ 32,500 $155,200 $29.700 $68,500 $285,900 $39.100 10 Each function is used for the following Percentage of: Activities Selling and Administrative Shipping Sales Marketing Other Activities: Entering Purchase Orders 55 Commissions 10 Shipping Activities 65 15 Invoicing 20 Cost to Make Sales Calls 30 10 Checking Credit 10 Samples, Catalog Info. 5 10 Special Handling Charges 5 5 Distribution Management 10 10 Marketing, by Customer Type 5 Advertising/Promotion 30 Marketing 15 50 5 Administrative Office Support 20 Licenses, Fees 5 100 100 100 100 * Note that $39,100 of the SG&A cost was not directly assigned. This amount represents the facility-sustaining activity cost. Reply 5:23 Qotill 90% E 3 : TABLE4 SEVEN FLAGS MANUFACTURING Activities and Cost drivers Cost Drivers for Allocating costs of Activities to Customer Groups (Large, Medium, Small) Activity Cost Driver Entering Purchase Orders Commissions Shipping Activities Number of Orders Sales Dollars with Medium Customers Number of Shipments Number of Invoices Sales Dollars with Large Customers Percent Invoicing Cost to Make Sales Calls Checking Credit Accounts >60 Samples, Catalog Info. Special Handling Charges Days Sales Dollars Management Estimate1 6 v Reply 5:23 Otill 90% e : Sales Vullis Saulpies, Lalang uwu. Special Handling Charges Management Estimate1 Sales Dollars Distribution Management Marketing, by Customer Type Advertising/Promotion Sales Dollars Marketing Administrative Office Management Estimate2 Number of Units Sold Number of Units Sold4 Sales Dollars with Medium Customers Support Licenses, Fees 120% to medium-sized customers; 80% to small- sized customers. 225% to medium-sized customers; 75% to small- sized customers. 3Excluding Specials 4Excluding Specials Reply 3. Develop an analysis which can be used to assess the profitability of the three customer groups of Seven Flags-large, medium and small customer account sizes. Use the information in Tables 1-4 to trace and allocate the costs necessary for the analysis. (preferably, the analysis should be presented as tables (copied from excel sheets, which may also be attached -optional)] [20 Points) 4. How does the analysis done in part 3 above help Seven Flags make better decisions? [Max 200 words) (10 Points) Seven Flags Manufacturing BACKGROUND: Seven Flags Manufacturing is one of a dozen companies that produces and sells towels for the U.S. "sports towel" market. A "sports towei" is a towel that has the promotion of an event or a logo printed on it. They're called sports towels because their most popular use is for distribution in connection with major sporting events such as the Super Bowl, NCAA Final Four, Augusta National Golf Tournament and the U.S. Open Tennis Tournament. Towels with college, NBA and NFL team logos, and promotions for commercial products such as soft drinks, beer, fast food chains, etc., are also big sellers. The firm designs, knits, prints and embroiders towels. The firm knits all the towels it sells and tracks costs for towel production separately from the cost to customize the towels. Seventy-five percent of its orders include logo design, while the balance are print only and require the payment of a license fee for the logo used. However, about 15% of its orders include embroidery. Towels are made in three sizes: regular (18" x 30"), hand (12" x 20") and mid-range (15" 24"). The normal production cycle for an order of white towels is three days. If a customer wants a colored towel, the basic white towel made by Seven Flags is sent to a dyeing firm, which extends the production cycle of an order by three days. Also, occasionally, customers order towels in sizes other than the three standard sizes. These towels are called "special" The firm now produces a "medium" quality towel. They have had some difficulty with the "staying power" of the material printed on these towels, which is attributed to the towel quality, the ink and the printing process. Customers have complained that the ink "lays on the surface" and it cracks and peels off. Seven Flags recently made a break-through in developing an ink that soaks into the towel, won't wash out and is non-toxic. A big advantage of this ink is that it avoids EPA disposal requirements because is can be "washed down the drain". Due to these characteristics of its new ink, Seven Flags is considering upgrading the quality of the basic towel it produces because it will "take" the ink better, both the towel and the ink will last longer and the product will sell at a higher price. If it takes this step, the company will evaluate expanding its marketing and sales area with the objective of "going national". CUSTOMERS: Except for a few non-regional chains, Seven Flags' sales are predominantly in the southeastern states. The company sells its products to 986 different customers. These customers differ primarily in the volume of their purchases, so management classifies each customer in one of three groups: large (8 customers), medium (154 customers) and small (824 customers). Large customers are primarily national chains, small customers are single store operations (including pro shops at golf courses) and medium-sized customers are small chains, large single stores or licensing agents for professional sports teams and manufacturers of consumer products. Table 1 gives the product and customer size statistics for 2001 Seven Flags has a different approach to customers in each of its three categories. A small group of in-house sales people sell directly to buyers in the large customer category. Independent manufacturer representatives, on commission, call on the license holder or the manager of a store in the medium customer category. Ads placed in regional and national magazines and newspapers target customers primarily in the small customer segment, who call or mail in their orders Seven Flags does not give discounts and it ships all order free on board (FOB) point of origin, i.e., customers pay their freight costs. MANUFACTURING: Seven Flags has a modern knitting and printing plant in the foothills of North Carolina's Seven Flags Mountains. Upgrading the facilities over recent years was accompanied by the introduction of an activity-based costing (ABC) system to determine product costs. The cost accounting system is fairly sophisticated and management has confidence in the accuracy of the manufacturing cost figures for each product line. Table 2 shows the firm's unit costs for various items. Company management is committed to adopting advanced manufacturing techniques such as benchmarking and just-in-time (JIT) The corporate culture necessary for the success of such techniques is evolving and worker empowerment is already a major program In addition, workers are allowed several hours away from regular work assignments each week for training programs conferring on budgets and work improvements and applying the ABC system PERFORMANCE: Select o to take a screens The company is profitable. However, management has become concerned about the profitability of the customers in its three customer-size categories_large, medium and small Different custom Management has no basis for identifying customers that generate high profits or to drop those that do not generate enough revenues to cover the expenses to support them Under the previous a determine the costs of supporting individual customers. With the introduction of ABC, it now may be possible to determine customer profitability. Table 3 shows how the administrative and selling costs are assigned and re-assigned between variou areas and to sub activities in the selling and marketing areas. Table 4 provides a list of selling and marketing activities and the activity base to use in assigning costs to each. TABLE 1 SEVEN FLAGS MANUFACTURING Sales Information Product and Customer Size Statistics Sales in Units by Customer Account Size Large Medium Small Total Towel: Regular 27,250 16,600 10,550 54,400 Mid-Size 36,640 18,552 10,308 65,500 Hand 35,880 19,966 95,954 151,800 Special 480 3,426 594 4,500 Number of Units Sold 100,250 58,544 117,406 276,200 Number of Units Embroidered 5,959 6,490 29,394 41,842 Number of Units Dyed 20,536 9,935 12,328 42,798 Sales Volume Revenue $308,762 $183,744 $318,024 $810,530 Number of Orders Received 133 845 5,130 6,108 Number of Shipments Made 135 923 5,443 6,501 Number of Invoices Sent 112 754 4,737 5,603 Accounts with Balance >60 Days 1 11 122 134 TABLE 2 SEVEN FLAGS MANUFACTURING Unit Cost Information Line 1 Direct Manufacturing Costs Per Unit Quantity Sales Price Material Labor Overhead Unit Cost Towels: Regular 54,400 $3.60 50.60 $0.37 $0.22 $1.19 Mid-Size 65,500 3.20 0.50 0.33 0.20 1.03 Hand 151,800 2.55 0.39 0.31 0.19 0.89 Special 4,500 4.00 0.67 0.48 0.29 1.44 Line 2 Direct Costs of Customizing Per Unit Quantity Cost Material Labor Overhead Total Inking (based on passes) 552,400 $0.0030 $0.0045 $0.0742 50.0817 Dyeing 42,798 S0.11 0.0000 0.1100 Embroidery 41,842 0.0026 0.1750 1.0994 1.2770 Direct Labor Wage Rate: $9.00 (Including Fringes) Inking requires one pass for each color used; average two colors per towel (i.e., 2 per unit), and is used on all towels. 9:09 Owl 95% I QU SEVEN FLAGS MANUFACTURING Selling and Administrative Costs and Activities Costs Incurred in Each Function (Shipping, Sales, Marketing) Directly Assigned to: Total Total Shipping Sales Marketing Other Assigned Unassigned Administration$170,000 17,000 $ 37,400 $20,400 $56,100 $130,900 $39,100* Selling 155,000 15,500 117.800 9.300 12.400 155,000 $325,000$ 32,500 $155,200 $29.700 $68,500 $285,900 $39.100 10 Each function is used for the following Percentage of: Activities Selling and Administrative Shipping Sales Marketing Other Activities: Entering Purchase Orders 55 Commissions 10 Shipping Activities 65 15 Invoicing 20 Cost to Make Sales Calls 30 10 Checking Credit 10 Samples, Catalog Info. 5 10 Special Handling Charges 5 5 Distribution Management 10 10 Marketing, by Customer Type 5 Advertising/Promotion 30 Marketing 15 50 5 Administrative Office Support 20 Licenses, Fees 5 100 100 100 100 * Note that $39,100 of the SG&A cost was not directly assigned. This amount represents the facility-sustaining activity cost. Reply 5:23 Qotill 90% E 3 : TABLE4 SEVEN FLAGS MANUFACTURING Activities and Cost drivers Cost Drivers for Allocating costs of Activities to Customer Groups (Large, Medium, Small) Activity Cost Driver Entering Purchase Orders Commissions Shipping Activities Number of Orders Sales Dollars with Medium Customers Number of Shipments Number of Invoices Sales Dollars with Large Customers Percent Invoicing Cost to Make Sales Calls Checking Credit Accounts >60 Samples, Catalog Info. Special Handling Charges Days Sales Dollars Management Estimate1 6 v Reply 5:23 Otill 90% e : Sales Vullis Saulpies, Lalang uwu. Special Handling Charges Management Estimate1 Sales Dollars Distribution Management Marketing, by Customer Type Advertising/Promotion Sales Dollars Marketing Administrative Office Management Estimate2 Number of Units Sold Number of Units Sold4 Sales Dollars with Medium Customers Support Licenses, Fees 120% to medium-sized customers; 80% to small- sized customers. 225% to medium-sized customers; 75% to small- sized customers. 3Excluding Specials 4Excluding Specials Reply 3. Develop an analysis which can be used to assess the profitability of the three customer groups of Seven Flags-large, medium and small customer account sizes. Use the information in Tables 1-4 to trace and allocate the costs necessary for the analysis. (preferably, the analysis should be presented as tables (copied from excel sheets, which may also be attached -optional)] [20 Points) 4. How does the analysis done in part 3 above help Seven Flags make better decisions? [Max 200 words) (10 Points)