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MCS,PHD
Argosy University/ Phoniex University/
Nov-2005 - Oct-2011
Professor
Phoniex University
Oct-2001 - Nov-2016
5-47Â Â Â Customer Profitability Analysis Doreen Company has gathered the following data pertaining to activities it performed for two of its major customers.
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|
 Number of orders |
Jerry Inc. 5 |
Donald Co. 30 |
|
Units per order |
1,000 |
200 |
|
Sales returns: |
 |
 |
|
Number of returns |
2 |
5 |
|
Total units returned |
40 |
175 |
|
Number of sales calls |
12 |
4 |
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Doreen sells its products at $200 per unit. The firm’s gross margin ratio is 25 percent. Both Jerry and Donald pay their accounts promptly and no accounts receivable is over 30 days. After a careful analysis using a business intelligence software on the operating data for the past 30 months the firm has determined the following activity costs:
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Sales calls                 $ 1,000 per visit Order processing                                300 per order
Deliveries                           500 per order
Sales returns                         100 per return and $5 per unit returned Sales salary           100,000 per month
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1.   Classify activity costs into cost categories and compute the total cost for Doreen Company to service Jerry Inc. and Donald Co.
2.   Compare the profitability of these two customers.
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