Schneider Electric manufactures power distribution equipment for commercial customers, such as hospitals and manufacturers. Activity-based costing was used to determine customer profitability. Customer service activities were assigned to individual customers, using the following assumed customer service activities, activity base, and activity rate: Customer Service Activity Activity Base Activity Rate Bid preparation Number of bid requests $400 per request Shipment Number of shipments $80 per shipment Support standard items Number of standard items ordered $25 per standard item Support nonstandard items Number of nonstandard items ordered $150 per nonstandard item Assume that the company had the following gross profit information for three representative customers: Income Statement Item Customer 1 Customer 2 Customer 3 Revenue $120,000 $200,000 $160,000 Cost of goods sold 76,800 110,000 83,200 Gross profit 43,200 90,000 76,800 Gross profit as a % of sales 36% 45% 48% The administrative records indicated that the activity-base usage quantities for each customer were as follows: Activity Base Customer 1 Customer 2 Customer 3 Number of bid requests 18 34 51 Number of shipments 30 60 48 Number of standard items ordered 15 30 50 Number of nonstandard items ordered 5 70 80 Prepare a customer profitability report dated for the year ended December 31, 2020, showing the income from operations after customer service activities. the gross profit as a percent of sales. the income from operations after customer service activities as a percent of sales. Prepare the report with a column for each customer. Round percentages to the nearest whole percent.
- Schneider Electric manufactures power distribution equipment for commercial customers, such as hospitals and manufacturers. Activity-based costing was used to determine customer profitability. Customer service activities were assigned to individual customers, using the following assumed customer service activities, activity base, and activity rate:
Customer Service Activity |
Activity Base |
Activity Rate |
Bid preparation |
Number of bid requests |
$400 per request |
Shipment |
Number of shipments |
$80 per shipment |
Support standard items |
Number of standard items ordered |
$25 per standard item |
Support nonstandard items |
Number of nonstandard items ordered |
$150 per nonstandard item |
Assume that the company had the following gross profit information for three representative customers:
Income Statement Item |
Customer 1 |
Customer 2 |
Customer 3 |
Revenue |
$120,000 |
$200,000 |
$160,000 |
Cost of goods sold |
76,800 |
110,000 |
83,200 |
Gross profit |
43,200 |
90,000 |
76,800 |
Gross profit as a % of sales |
36% |
45% |
48% |
The administrative records indicated that the activity-base usage quantities for each customer were as follows:
Activity Base |
Customer 1 |
Customer 2 |
Customer 3 |
Number of bid requests |
18 |
34 |
51 |
Number of shipments |
30 |
60 |
48 |
Number of standard items ordered |
15 |
30 |
50 |
Number of nonstandard items ordered |
5 |
70 |
80 |
- Prepare a customer profitability report dated for the year ended December 31, 2020, showing
- the income from operations after customer service activities.
- the gross profit as a percent of sales.
- the income from operations after customer service activities as a percent of sales. Prepare the report with a column for each customer. Round percentages to the nearest whole percent.
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