Stable Paper Delivery has decided to analyze the profitability of five new customers. It buys recycled paper at $12 per case and sells to retail customers at a list price of $14.80 per case. Data pertaining to the five customers are: E (Click the icon to view the data.) Stable Paper Delivery's five activities and their cost drivers are as follows: E (Click the icon to view the activities and cost drivers.) Read the requirements. ..... Requirement 1. Compute the customer-level operating income of each of the five retail - X Begin by calculating each customer's gross margin. Then calculate the operating incom minus sign for operating losses.) Requirements 1 2 1. 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. 2. 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? 3. Gross margin Data table Data table Activity Cost Driver Rate Customer Order taking $120 per purchase order 1 4 3 Customer visits $60 per customer visit Cases sold 1,700 8,780 61,800 33,000 2,300 $1 per delivery mile traveled Deliveries List selling price $14.80 $14.80 $14.80 $14.80 $14.80 Product handling $0.90 per case sold Actual selling price $14.80 $14.55 $13.10 $14.23 $13.32 Expedited deliveries $330 per expedited delivery Number of purchase orders 18 22 39 23 34 Number of customer visits 3 4 7 4 4 Number of deliveries 20 32 69 32 34 Print Done Miles traveled per delivery 21 7 10 11 36 Number of expedited deliveries 3
Stable Paper Delivery has decided to analyze the profitability of five new customers. It buys recycled paper at $12 per case and sells to retail customers at a list price of $14.80 per case. Data pertaining to the five customers are: E (Click the icon to view the data.) Stable Paper Delivery's five activities and their cost drivers are as follows: E (Click the icon to view the activities and cost drivers.) Read the requirements. ..... Requirement 1. Compute the customer-level operating income of each of the five retail - X Begin by calculating each customer's gross margin. Then calculate the operating incom minus sign for operating losses.) Requirements 1 2 1. 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. 2. 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? 3. Gross margin Data table Data table Activity Cost Driver Rate Customer Order taking $120 per purchase order 1 4 3 Customer visits $60 per customer visit Cases sold 1,700 8,780 61,800 33,000 2,300 $1 per delivery mile traveled Deliveries List selling price $14.80 $14.80 $14.80 $14.80 $14.80 Product handling $0.90 per case sold Actual selling price $14.80 $14.55 $13.10 $14.23 $13.32 Expedited deliveries $330 per expedited delivery Number of purchase orders 18 22 39 23 34 Number of customer visits 3 4 7 4 4 Number of deliveries 20 32 69 32 34 Print Done Miles traveled per delivery 21 7 10 11 36 Number of expedited deliveries 3
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter4: Activity-based Costing
Section: Chapter Questions
Problem 2CMA: The Chocolate Baker specializes in chocolate baked goods. The firm has long assessed the...
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Transcribed Image Text:Stable Paper Delivery has decided to analyze the profitability of five new customers. It buys recycled paper at $12 per case and sells to retail customers at a list price of $14.80 per case. Data
pertaining to the five customers are:
E (Click the icon to view the data.)
Stable Paper Delivery's five activities and their cost drivers are as follows:
E (Click the icon to view the activities and cost drivers.)
Read the requirements.
Requirement 1. Compute the customer-level operating income of each of the five retail
Begin by calculating each customer's gross margin. Then calculate the operating incom
minus sign for operating losses.)
Requirements
1
2
1.
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.
2.
What insights do managers gain by reporting both the list selling price and
the actual selling price for each customer?
3.
What factors should managers consider in deciding whether to drop one or
more of the five customers?
Gross margin
Data table
Data table
Activity
Cost Driver Rate
Customer
Order taking
$120 per purchase order
1
2
3
4
Customer visits
$60 per customer visit
Cases sold
1,700
8,780
61,800
33,000
2,300
Deliveries
$1 per delivery mile traveled
List selling price
$14.80
$14.80
$14.80
$14.80
$14.80
Product handling
$0.90 per case sold
Actual selling price
$14.80
$14.55
$13.10
$14.23
$13.32
Expedited deliveries
$330 per expedited delivery
Number of purchase orders
18
22
39
23
34
Number of customer visits
4
7
4
4
Number of deliveries
20
32
69
32
34
Print
Done
Miles traveled per delivery
21
7
10
11
36
Number of expedited deliveries
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