HORNGREN'S COST ACCT >IA<
16th Edition
ISBN: 9780136675464
Author: Datar
Publisher: PEARSON
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Textbook Question
Chapter 14, Problem 14.31P
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:
| Activity | Cost-Driver Rate |
| Order taking | $90 per purchase order |
| Customer visits | $75 per customer visit |
| Deliveries | $3 per delivery mile traveled |
| Product handling | $1.20 per case sold |
| Expedited deliveries | $250 per expedited delivery |
- 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.
Required
- 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?
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Students have asked these similar questions
Customer profitability. Bracelet Delights is a new company that manufactures custom jewelry. Bracelet Delights currently has six customers referenced by customer number: 01, 02, 03, 04, 05, and 06. Besides the costs of making the jewelry, the company has the following activities:
Customer orders. The salespeople, designers, and jewelry makers spend time with the customer. The cost-driver rate is $42 per hour spent with a customer.
Customer fittings. Before the jewelry piece is completed, the customer may come in to make sure it looks right and fits properly. Cost-driver rate is $30 per hour.
Rush orders. Some customers want their jewelry quickly. The cost-driver rate is $90 per rush order.
Number of customer return visits. Customers may return jewelry up to 30 days after the pickup of the jewelry to have something refitted or repaired at no charge. The cost-driver rate is $40 per return visit.
Analyzing profitability
Father Furniture Company manufactures and sells oak tables and chairs. Price and cost data for the furniture follow:
Father Furniture has three sales representatives: Adam, Ben, and Caleb. Adam sold 100 tables With 6 chairs each. Ben sold 110 tables With 4 chairs each. Caleb sold 80 tables with 8 chairs each.
Requirements
Calculate the total contribution margin and the contribution margin ratio for each sales representative (round to two decimal places).
Which sales representative has the highest contribution margin ratio? Explain Why
Using the chart, I need assistance in answering the following questions w/ explanations:
(The cost of the bags, which must be ordered in batches of 100)
a) If this was a profit-making activity, at the entry fee of $20, what would be the profit-maximizing quantity of participants/bags?
(I got 300 participants/bags)
b) Use the information in the table to determine the exact breakeven quantity of participants/bags for the entry fee of $20. Use the formula Qb = F/(P – AVC).
(I am not sure what to do or if I did this right. I got 113.)
Chapter 14 Solutions
HORNGREN'S COST ACCT >IA<
Ch. 14 - Prob. 14.1QCh. 14 - Why is customer-profitability analysis an...Ch. 14 - Prob. 14.3QCh. 14 - A customer-profitability profile highlights those...Ch. 14 - Give examples of three different levels of costs...Ch. 14 - What information does the whale curve provide?Ch. 14 - A company should not allocate all of its corporate...Ch. 14 - What criteria might managers use to guide...Ch. 14 - Once a company allocates corporate costs to...Ch. 14 - A company should not allocate costs that are fixed...
Ch. 14 - How should a company decide on the number of cost...Ch. 14 - Show how managers can gain insight into the causes...Ch. 14 - How can the concept of a composite unit be used to...Ch. 14 - Explain why a favorable sales-quantity variance...Ch. 14 - How can the sales-quantity variance be decomposed...Ch. 14 - Flexible-budget variance, sales-quantity,...Ch. 14 - Sales-volume, sales-mix, and sales-quantity...Ch. 14 - Cost allocation in hospitals, alternative...Ch. 14 - Customer profitability, customer-cost hierarchy....Ch. 14 - Customer profitability, service company. Instant...Ch. 14 - Customer profitability, distribution. Best Drugs...Ch. 14 - Cost allocation and decision making. Reidland...Ch. 14 - Cost allocation to divisions. Rembrandt Hotel ...Ch. 14 - Cost allocation to divisions. Bergen Corporation...Ch. 14 - Prob. 14.25ECh. 14 - Variance analysis, working backward. The Hiro...Ch. 14 - Variance analysis, multiple products. Emcee Inc....Ch. 14 - Market-share and market-size variances...Ch. 14 - Click here to open your MyFinanceLab Study Plan...Ch. 14 - Customer profitability. Bracelet Delights is a new...Ch. 14 - Customer profitability, distribution. Green Paper...Ch. 14 - Customer profitability in a manufacturing firm....Ch. 14 - Customer-cost hierarchy, customer profitability....Ch. 14 - Allocation of corporate costs to divisions. Cathy...Ch. 14 - Cost allocation to divisions. Forber Bakery makes...Ch. 14 - Prob. 14.36PCh. 14 - Cost-hierarchy income statement and allocation of...Ch. 14 - Variance analysis, sales-mix and sales-quantity...Ch. 14 - Market-share and market-size variances...Ch. 14 - Variance analysis, multiple products. The Robins...Ch. 14 - Customer profitability and ethics. KC Corporation...
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