Case 11: the Cooper Processing Company

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Case 11: The Cooper Processing Company The Cooper Processing Company (CPC) is a manufacturer, or processor, of food products. Located in Lansing, Michigan, the company provides a national market with processed and packaged meat items, such as hot dogs, bologna, and sausage. Due to increased costs in marketing and logistics, CPC hired you as an expert to analyze costs and investments. After analysis, make recommendations to management. The company sells its products through two separate channels of distribution. Each is treated as a separate profit center with full financial responsibility for income statement and balance sheet. The first channel is associated with retail grocery stores and supermarkets. The second channel is…show more content…
You find that the gross margin in the retail channel is 70%; in the foodservice channel it is 45%. Next, you find that all of the salespeople are paid a straight salary, and all receive exactly the same amount of salary. However, you find that of the 50 sales people employed by CPC, 40 of them are devoted to the retail channel, 10 of them are devoted to the foodservice channel. Since there are no sales managers and each salesperson pays for selling expenses out of their salary, this accounts for all of the personal selling expense. You learn that all sales promotions were conducted in the retail channel. Next, you discover that there is a great difference in the number of orders placed by customers in each channel and the deliveries to each channel. You find that the retail channel accounts for 70% of the orders placed and 80% of the delivery expense. The foodservice channel accounts for 30% of the orders placed and 20% of the delivery expense. Your activity-based approach suggests that this is a reasonable way to trace the costs directly to each segment. Next you learn that packaging differs for each channel. You discover that retail accounts for 80% of the packaging cost, foodservice for 20%. (Don’t worry about how you discovered this). Next, you discover that only the retail channel requires “labeling”. The company has a machine which applies these labels.

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