there are only two customer groups: corporate customers and event planners
Flower Season Ltd is a local florist. Flower Season has experienced significant growth in recent years, but the company is facing some difficulty with managing their customers recently. Its owner, Lily Shaw, is seeking ways to increase customer profitability. Lily asked her team to assess the relative profitability of Flower Season's two major customer groups - corporate customers and event planners. This requires Flower Season to identify the drivers of its selling, general and administrative (SG&A) expenses for the 2021 financial year of $90,000. Additional data on the three main product lines offered by Flower Season (fresh cut flowers, green plants and gift baskets) gathered for the 2021 financial year are as follows: Green plants Gift baskets Fresh cut flowers $12 $10 $25 Selling price per unit Cost of goods sold per unit $15 $11 $12 Sales units: Corporate customers Event planners Total sales units 12,000 35,000 47,000 8,000 10,000 18,000 20,000 5,000 25,000 The resource driver, the number of full-time equivalent staff (FTE), and the activity drivers associated with these customer-driven activities are listed as follows: Activity Sales calls Special shipping FTE 3 6 Activity Driver Number of sales visits Number of special shipments Total Corporate customers 50 25 Number of sales visits Number of special shipments Event planners 30 125 Total 80 150 Part A Conduct a customer profitability analysis for the 2021 financial year, showing the relative profitability of each customer group. Use activity-based costing to allocate the SG&A costs between the customer groups. You must key in your answer or a zero in each box below. Otherwise, you will lose marks. Please do NOT input any symbols (e.g., $). You can choose not to type anything in the boxes for working. However, we generally award partial marks for correct working even if your answer is wrong. a) Your first step is to calculate the total gross margin for each customer group. Key in your answers and show all workings in the boxes for workings provided below. (2 marks) b) Your second step is to calculate the total cost to serve for each customer group. Key in your answers and show all workings in the boxes for workings provided below. (4 marks) c) Your third step is to calculate the net profitability for each customer group. Key in your answers and show all workings in the boxes for working provided below. (1 mark) Flower Season Ltd is a local florist. Flower Season has experienced significant growth in recent years, but the company is facing some difficulty with managing their customers recently. Its owner, Lily Shaw, is seeking ways to increase customer profitability. Lily asked her team to assess the relative profitability of Flower Season's two major customer groups - corporate customers and event planners. This requires Flower Season to identify the drivers of its selling, general and administrative (SG&A) expenses for the 2021 financial year of $90,000. Additional data on the three main product lines offered by Flower Season (fresh cut flowers, green plants and gift baskets) gathered for the 2021 financial year are as follows: Green plants Gift baskets Fresh cut flowers $12 $10 $25 Selling price per unit Cost of goods sold per unit $15 $11 $12 Sales units: Corporate customers Event planners Total sales units 12,000 35,000 47,000 8,000 10,000 18,000 20,000 5,000 25,000 The resource driver, the number of full-time equivalent staff (FTE), and the activity drivers associated with these customer-driven activities are listed as follows: Activity Sales calls Special shipping FTE 3 6 Activity Driver Number of sales visits Number of special shipments Total Corporate customers 50 25 Number of sales visits Number of special shipments Event planners 30 125 Total 80 150 Part A Conduct a customer profitability analysis for the 2021 financial year, showing the relative profitability of each customer group. Use activity-based costing to allocate the SG&A costs between the customer groups. You must key in your answer or a zero in each box below. Otherwise, you will lose marks. Please do NOT input any symbols (e.g., $). You can choose not to type anything in the boxes for working. However, we generally award partial marks for correct working even if your answer is wrong. a) Your first step is to calculate the total gross margin for each customer group. Key in your answers and show all workings in the boxes for workings provided below. (2 marks) b) Your second step is to calculate the total cost to serve for each customer group. Key in your answers and show all workings in the boxes for workings provided below. (4 marks) c) Your third step is to calculate the net profitability for each customer group. Key in your answers and show all workings in the boxes for working provided below. (1 mark)
