Chap 5

Better Essays
Chapter 5

Activity-Based Costing and Customer Profitability Analysis


|5-1 |Blue Ridge Manufacturing (Activity-Based Costing for Marketing Channels) |
|5-2 |Columbo Soft-Serve Frozen Yogurt: Using Activity Based Costing To Assess Channel/Customer Profitability |
|5-3 |Wilson Electronics (A) |
|5-4 |Wilson Electronics (B) |
|5-5 |The Buckeye National Bank (ABC Costing in the Service Sector) |
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5. In the study of the four largest customers, which is the most profitable and why?

5-4 “Cost System Redesign at a Medium-Sized Company”, by David E. Stout, Ph.D., and Gregory P. Bedenis, CPIM, Management Accounting Quarterly (Summer 2007), Vol. 8, No. 4

This article looks at a company that was experiencing unprofitable growth and weak cash-flow activity. The authors examine how an ABC method allowed the company to become more competitive, to look at their current product mix and product lines, and ultimately, to improve cash flow and product profitability.

Discussion Questions 1. Why for any manufacturer is proper inventory management important? 2. What are the elements of an ABC system? 3. What is a cost objective? 4. Why are duration drives used in an ABC system? 5. What internal factors limit the ABC model’s ability to influence the decision-making process in a company?

5-1 Blue Ridge Manufacturing


Blue Ridge Manufacturing is one of a dozen companies that produces and sells towels for the U.S. "sports towel" market. A "sports towel" is a towel that has the promotion of an event or a logo printed on it. They 're called sports towels because their most popular use is for distribution in connection with major sporting events such as the Super Bowl, NCAA Final Four, Augusta National Golf Tournament and the U.S. Open Tennis Tournament. Towels with college, NBA and NFL team logos,
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