please help.Thanks system to prepare a product-line profitability report for FS
ID: 2328794 • Letter: P
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please help.Thanks
system to prepare a product-line profitability report for FS 3. Wh at new insights does the ABC system in requirement 2 provide to 5-28 ABC, wholesale, customer profitability. Veritek Wholesalers operate ture items to four department-store chains (customers). Mr. Veritek commted mine product-line profitability. The same ideas apply to customer profitabiinty cu Olesalers operates at capacity and se "We apply ABC to de out our we should omtability as well." Veritek Wholesalers sends catalogs to corporate purchas date and receive a full purchase price refund. The following data were c e within a six-month period from collected from last on a monthly basis. The customers are entitled to return unsold merchandise merchandise with urchasing departments year's operations: Customer 2 S40,000 $20,000 $10,000 $5,000 32 S 8,000 3,000 7,700 9,000 100 Gross sales Sales returns: 24 64 Number of items Amount 96 Number of orders 140 46 30 Regular Rush 12 45Explanation / Answer
Above calculations indicates that all customer except customer - 2 had contributed to profits of the company. Total operating or processing cost incurred for customer - 2 is significantly higher than the Gross margin earned from his orders.
Activity based customer profitability helps the managment to understand the reasons for loss incurred with a particular customer. In the case of customer - 2 we observe that number of orders (both regular and rush) are on high side when compared with the net sales made to him. Hence he may to advised to make orders for higher quantity and reduce the number of orders significantly.
1 2 3 4 Gross sales 40000 20000 110000 95000 (-) Returns 8000 3000 7700 9000 Net sales 32000 17000 102300 86000 (-) Cost of goods sold 24000 12750 76725 64500 Gross margin 8000 4250 25575 21500 Operating expenses Regular order processing 900 4200 1650 3000 Rush order processing 1200 6900 1800 6750 Returned items processing 1440 360 960 480 Catalogs and customer support 1200 1200 1200 1200 Total operating expenses 4740 12660 5610 11430 Contribution to profit 3260 -8410 19965 10070Related Questions
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