Customer profitability, distribution. Best Drugs is a distributor of pharmaceutical products. Its ABC system has five activities: Activity Area 1. Order processing 2. Line-item ordering Cost Driver Rate in 2017 $42 per order $5 per line item $47 per store delivery $4 per carton $13 per stocking-hour 3. Store deliveries 4. Carton deliveries 5. Shelf-stocking Rick Flair, the controller of Best Drugs, wants to use this ABC system to examine individual customer profit- ability within each distribution market. He focuses first on the Ma and Pa single-store distribution market. Using only two customers helps highlight the insights available with the ABC approach. Data pertaining to these two customers in August 2017 are as follows: Ann Arbor Pharmacy San Diego Pharmacy Total orders 13 Average line items per order 11 19 Total store deliveries 5 Average cartons shipped per store delivery Average hours of shelf-stocking per store delivery Average revenue per delivery Average cost of goods sold per delivery 21 18 0.5 0.75 $2,600 $2,100 $1,900 $1,700

Customer profitability, distribution. Best Drugs is a distributor of pharmaceutical products. Its ABC system has five activities: Activity Area 1. Order processing 2. Line-item ordering Cost Driver Rate in 2017 $42 per order $5 per line item $47 per store delivery $4 per carton $13 per stocking-hour 3. Store deliveries 4. Carton deliveries 5. Shelf-stocking Rick Flair, the controller of Best Drugs, wants to use this ABC system to examine individual customer profit- ability within each distribution market. He focuses first on the Ma and Pa single-store distribution market. Using only two customers helps highlight the insights available with the ABC approach. Data pertaining to these two customers in August 2017 are as follows: Ann Arbor Pharmacy San Diego Pharmacy Total orders 13 Average line items per order 11 19 Total store deliveries 5 Average cartons shipped per store delivery Average hours of shelf-stocking per store delivery Average revenue per delivery Average cost of goods sold per delivery 21 18 0.5 0.75 $2,600 $2,100 $1,900 $1,700

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

Bigdog Company distributes pet products. Its ABC system has five activities: Activity Area Cost Driver Rate in 2020 1. Order processing $50 per order 2. Line-item ordering $5 per line item 3. Store deliveries $40 per store delivery 4. Carton deliveries $6 per carton 5. Shelf-stocking $19 per stocking hour Rufus McBrain, the controller of Bigdog Company, wants to use this ABC system to examine customer profitability. He focuses on two of his customers to find out the insights he can gain from using this system. Data for these two customers in April 2020 are as follows: Pet Store Annerley RSPCA store Springwood Total orders 13 7 Average line items per order 11 19 Total store deliveries 5 7 Average cartons shipped per store delivery 21 18 Average hours of shelf stocking per store delivery 0.5 0.75 Average revenue per delivery $2,600 $1,900 Average cost of goods sold per delivery…
Company MN is a wholesale distributor. It uses an ABC system to analyze customer profitability for its small- and medium-sized retail customers. The cost pool, cost driver and other relevant information is shown below. Cost pool Costs Cost driver Small retailer Medium retailer Ordering 300,000 Number of orders 8,000 4,000 Delivery 750,000 Number of deliveries 10,800 4,200 Customer Service 1,200,000 Number of products sold 320,000 480,000 Total overhead 2,250,000 What is the average total overhead cost per product sold to small and medium retailers? (Assuming every item sold requires certain involvement of customer service) Choose answer as below. A. Small: $3.81; Medium: $2.15 B. Small: $3.81; Medium: $1.5 C. Small: $3.81; Medium: $0.44 D. Small: $3.81; Medium: $0.21
Company MN is a wholesale distributor. It uses an ABC system to analyze customer profitability for its small- and medium-sized retail customers. The cost pool, cost driver and other relevant information is shown below. Cost pool Costs Cost driver Small retailer Medium retailer Ordering 300,000 Number of orders 8,000 4,000 Delivery 750,000 Number of deliveries 10,800 4,200 Customer Service 1,200,000 Number of products sold 320,000 480,000 Total overhead 2,250,000 What is the average total overhead cost per product sold to small retailers? (Assuming every item sold requires certain involvement of customer service) Choose the below answer. A. $3.81 B. $1.50 C. $25.00 D. $50.00
Customer profitability, distribution. Green Paper Delivery has decided to analyze the profitability of five new customers. It buys recycled paper at $20 per case and sells to retail customers at a list price of $26 per case. Data pertaining to the five customers are: Green Paper Delivery’s five activities and their cost drivers are: Compute the customer-level operating income of each of the five retail customers now being examined (1, 2, 3, 4, and 5). Comment on the results. What insights do managers gain by reporting both the list selling price and the actual selling price for each customer? What factors should managers consider in deciding whether to drop one or more of the five customers?
World View Outfitters operates a large outdoor clothing and equipment store with three main product lines: clothing, equipment, and shoes. World View Outfitters operates at capacity and allocates selling, general, and administration (S, G & A) costs to each product line using the cost of merchandise of each product line. The company wants to optimize the pricing and cost management of each product line and is wondering if its accounting system is providing it with the best information for making such decisions. Store manager Abe Barry gathers the following information regarding the three product lines: For2017,World View Outfitters budgets the following selling, general, and administration costs: 1. Suppose World View Outfitters uses cost of merchandise to allocate all S, G & A costs. Prepare budgeted product-line and total company income statements. 2. Identify an improved method for allocating costs to the three product lines. Explain. Use the…
Flair ranks the individual customers in the Ma and Pa single-store distribution market on the basis of monthly operating income. The cumulative operating income of the top 20% of customers is $58,120. Best Drugs reports operating losses of $23,670 for the bottom 40% of its customers. Make four recommendations that you think Best Drugs should consider in light of this new customer-profitability information.
Paint Company has two customers Commercial and Consumer with data as follows: Commercial Consumer Selling Price per unit $15 $15 Units Sold 5,000 8,000 Manufacturing Cost per unit $8.25 $8.25 Number of Purchase Orders 76 212 Number of Deliveries 104 287 Number of Expedited deliveries 357 589 Customer Visits 58 75 Paint Company’s management accountant has gathered the following ABC rate information: ABC Cost Rate Purchase Orders $ 72 per purchase order Deliveries $ 43 per delivery Expedited Deliveries $ 18 per expedited delivery Customer Visits $ 56 per customer visit Using the information in the tables above and allocating indirect support costs using ABC to customers, what is the Operating Income for the Commercial customer?
The A-to-Z Office Supply Company Christine Yamaguchi is the manager of the A-to-Z Office Supply Company in Charlotte. The company attempts to gain an advantage over its competitors by providing quality customer service, which includes prompt delivery of orders by truck or van and always being able to meet customer demand from its stock. To achieve this degree of customer service, A-to-Z must stock a large volume of items on a daily basis at a central warehouse and at three retail stores in the city and suburbs. Christine maintains these inventory levels by borrowing cash on a daily basis from the First Piedmont Bank. She estimates that for the coming fiscal year, the company’s demand for cash to pay for inventory will be $17,000 per day for 305 working days. Any money she borrows during the year must be repaid with interest by the end of the year. The annual interest rate currently charged by the bank is 9%. Any time Christine takes out a loan to purchase inventory, the bank charges…
EOQ for a retailer. The Cloth Center sells fabrics to a wide range of industrial and consumer users. One of the products it carries is denim cloth, used in the manufacture of jeans and carrying bags. The supplier for the denim cloth pays all incoming freight. No incoming inspection of the denim is necessary because the supplier has a track record of delivering high-quality merchandise. The purchasing officer of the Cloth Center has collected the following information: Annual demand for denim cloth 20,000 yards Ordering cost per purchase order P160 Carrying cost per year 20% of purchase costs Safety-stock requirements None Cost of denim cloth P8 per year The purchasing lead time is 2 weeks. The Cloth Center is open 250 days a year (50 weeks for 5 days a week).1. Calculate the EOQ for denim cloth.2. Calculate the number of orders that will be placed each year3. Calculate the reorder point for denimcloth.
Retail companies with today’s online, as well as in-store sales have a lot of data to keep track of! Keeping track of sales, costs, and profits daily is essential to making the most of a business. This exercise illustrates how to use the skills presented in this Module to generate the data needed daily by a retail company. Create the following calculated columns. a) In I4, and J4, use a VLOOKUP function that will look up the Product Price and Product Cost based on the Product Sold column which lists an ID number. [Hint: The Product Table sheet lists the Price and Cost] If any error messages appear, check the Range Lookup. b) In K4, use a formula to calculate Profit. Hint: Profit =(Product Price-Product Cost)*Units Sold Format columns I, J, and K as currency with two decimal places. Make a copy of the Sales sheet and rename it Online Sales by Date. Place this sheet to the right of the Sales sheet. Answer the following question by filtering the data accordingly. a) What was the…
Boston Home Center (BHC) offers customers the use of a truck at $64 per trip to take purchased merchandise home. BHC reports the following information about the trucks it has for customer usage: Cost Driver Rate Cost Driver Volume Resources used Operation $ 0.55 per mile 46,200 miles Administration 25.00 per trip 1,874 trips Resources supplied Operation $ 35,400 Administration $ 62,400 Sales revenue totaled $80,000. Required: Prepare a traditional income statement. Prepare an activity-based income statement. Complete this question by entering your answers in the tabs below. Required A Required B Prepare a traditional income statement. Traditional Income Statement Sales revenue Operation costs Administration costs Operating profit Activity-Based Income Statement Resources Used Unused Resource Capacity…
A clothing retailer is going to mail out 10,000 catalogues. It costs $2 to mail out each catalogue. When a customer places an order from a catalogue assume a profit of $50 per order is earned. It is assumed that 5% of those who receive a catalogue will place an order however, this number can vary. Use the file below to help you with your tables. Assume that: [total profit = total profit made from the orders – the amount spent on mailing out the catalogues]. a) Use a one-variable data table to determine how the total profit earned from the mailing will vary depending on a response rate between 4% and 10% (with increments of 2%). b) Create a two-variable data table to show how the total profit changes with a varying response rate and number of catalogues mailed. Vary the response rate between 4% and 10% with increments of 2% and vary the number of catalogues mailed from 10,000 to 30,000 at increments of 5000.