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Category > Accounting Posted 16 Aug 2017 My Price 9.00

Doreen Company

5-47    Customer Profitability Analysis Doreen Company has gathered the following data pertaining to activities it performed for two of its major customers.

 

 

 

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

 

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:

 

Activity                         Cost Driver and Rate

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

 

 

Required

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.

Answers

(5)
Status NEW Posted 16 Aug 2017 08:08 PM My Price 9.00

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