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
Chapter11: Differential Analysis And Product Pricing
Section: Chapter Questions
Problem 22E: Total cost method of product pricing Based on the data presented in Exercise 17, assume that Smart...
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