Colleen Company has gathered the following data pertaining to activities it performed for two of its major customers. Jerry, Incorporated Kate Company Number of orders 6 60 Units per order 3,000 460 Sales returns: Number of returns 4 3 Total units returned Number of sales calls 50 15 190 4 Colleen sells its products at $230 per unit. The firm's gross margin ratio is 25%. Both Jerry and Kate pay their accounts promptly and no accounts receivable is over 30 days. After using business analytics software to carefully analyze the operating data for the past 30 months, the firm has determined the following activity costs: Activity Sales calls Order processing Deliveries Sales returns Sales salary Required: Cost Driver and Rate $800 per visit 280 per order 440 per order 240 per return and $3 per unit returned 83,000 per month 1. Using customers as the cost objects, classify the activity costs into cost categories (unit-level, batch-level, etc.) and compute the total cost for Colleen Company to service Jerry, Incorporated and Kate Company. 2. Compare the profitability of these two customers.

Colleen Company has gathered the following data pertaining to activities it performed for two of its major customers. Jerry, Incorporated Kate Company Number of orders 6 60 Units per order 3,000 460 Sales returns: Number of returns 4 3 Total units returned Number of sales calls 50 15 190 4 Colleen sells its products at $230 per unit. The firm's gross margin ratio is 25%. Both Jerry and Kate pay their accounts promptly and no accounts receivable is over 30 days. After using business analytics software to carefully analyze the operating data for the past 30 months, the firm has determined the following activity costs: Activity Sales calls Order processing Deliveries Sales returns Sales salary Required: Cost Driver and Rate $800 per visit 280 per order 440 per order 240 per return and $3 per unit returned 83,000 per month 1. Using customers as the cost objects, classify the activity costs into cost categories (unit-level, batch-level, etc.) and compute the total cost for Colleen Company to service Jerry, Incorporated and Kate Company. 2. Compare the profitability of these two customers.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter18: The Management Of Accounts Receivable And Inventories

Section: Chapter Questions

Problem 1P

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