1. Materials-handing labor costs vary with the number of units of furniture shipped to customers. 2. Different areas of the warehouse stock furniture for different customers. Materials-handling equipment in an area and amortization costs on the equipment are identified with individual customer accounts. Any equipment not used remains idle. The equipment has a one-year useful life and zero disposal price. 3. Scenario allocates rent to each customer account on the basis of the amount of warehouse space occupied by the products to be shipped to that customer. 4. Marketing costs vary with the number of sales visits made to customers. 5. Purchase order costs vary with the number of purchase orders received; delivery processing costs vary with the number of shipments made. 6. Scenario allocates fixed general administration costs to customers on the basis of dollar sales made to each customer.
1. Materials-handing labor costs vary with the number of units of furniture shipped to customers. 2. Different areas of the warehouse stock furniture for different customers. Materials-handling equipment in an area and amortization costs on the equipment are identified with individual customer accounts. Any equipment not used remains idle. The equipment has a one-year useful life and zero disposal price. 3. Scenario allocates rent to each customer account on the basis of the amount of warehouse space occupied by the products to be shipped to that customer. 4. Marketing costs vary with the number of sales visits made to customers. 5. Purchase order costs vary with the number of purchase orders received; delivery processing costs vary with the number of shipments made. 6. Scenario allocates fixed general administration costs to customers on the basis of dollar sales made to each customer.
Chapter4: Operating Activities: Sales And Cash Receipts
Section: Chapter Questions
Problem 4.8C
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1. Materials-handing labor costs vary with the number of units of furniture shipped to customers.
2. Different areas of the warehouse stock furniture for different customers. Materials-handling
equipment in an area and amortization costs on the equipment are identified with individual
customer accounts. Any equipment not used remains idle. The equipment has a one-year useful
life and zero disposal price.
3. Scenario allocates rent to each customer account on the basis of the amount of warehouse
space occupied by the products to be shipped to that customer.
4. Marketing costs vary with the number of sales visits made to customers.
5. Purchase order costs vary with the number of purchase orders received; delivery processing
costs vary with the number of shipments made.
6. Scenario allocates fixed general administration costs to customers on the basis of dollar sales
made to each customer.
Required:
1. What are the relevant costs and relevant revenues when Scenario company considers dropping
the Victor Inc. as a custom because of COVID-19?
2. Please calculate the operating income(loss) if Scenario drop Victor Inc. as a custom.
3. Should Scenario keep Victor as a customer or just drop it? Why?
Question 5:
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Question 4:
Scenario company supplies furniture to three local retailers, Danny, Penner, and Victor Inc. The
following exhibit presents representative revenues and costs of Scenario by customers for the year
2019. Additional information on Scenario's costs for different activities at various levels of the cost
hierarchy is as follows:
Danny
Penner
Victor
Total
Sales
$540,000
$340,000
$450,000
$1,330,000
$970,000
Cost of goods sold
370,000
220,000
380,000
Materials-handling labour
47,000
20,000
37,000
$104,000
Materials-handling equipment (Cost
written off as amortization)
$24,000
$36,000
$32,000
10,000
6,000
8,000
Rent
14,000
8,000
14,000
Marketing support
12,000
9,000
11,000
Purchase orders and delivery processing
13,000
$32,000
$48,000
$1,246,000
7,000
12,000
Gene
adr
20,000
12,000
16,000
Total operating costs
486,000
282,000
478,000
Operating income
$54,000
$58,000
-$28,000
$84,000
1. Materials-handing labor costs vary with the number of units of furniture shipped to customers.
2. Different areas of the warehouse stock furniture for different customers. Materials-handling
equipment in an area and amortization costs on the equipment are identified with individual
customer accounts. Any equipment not used remains idle. The equipment has a one-year useful
life and zero disposal price.
3.
Scenario allocates rent to each customer account on the basis of the amount of warehouse
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