Can someone help me with Frequent and Infrequent Customer Profitability? I am ha
ID: 2556266 • Letter: C
Question
Can someone help me with Frequent and Infrequent Customer Profitability? I am having trouble locating the correct formula to solve this. Thanks
Exercise 11.11
External Linkages, Customer Costing, Customer Profitability
Required:
1. Assign the customer-related activity costs to each category of customers in proportion to the sales revenue earned by each customer type.
Calculate the profitability of each customer type. (Because sales revenues for each customer type are equal, the profitability will be the same for each customer type.)
$
2. Assign the customer-related activity costs to each customer type using activity rates. Enter the appropriate activity rates below.
Calculate the profitability of each customer category.
Sales revenue $ Customer-related activity costs $Explanation / Answer
Answer
Frequently Ordering Customer
Less frequently Ordering Customers
Sales Orders
21000
2100
Average order size
2100
21000
Total part sold
44100000
44100000
Sale price per part
$1.05
$1.05
Total Sales Revenue
$46305000
$46305000
Customer related Activity Costs
$12390000
Allocated to Frequently order customers
$6195000
Allocated to Less Frequently Ordering Customers
$6195000
Sales revenue
$46305000
Customer Related Activity Costs
$6195000
Profitability
$40,110,000
Cost
Cost driver
Frequently Ordering Customers
Less frequently Ordering Customers
Total Cost Driver
Activity rate per cost driver
Processing Sales Orders
$2310000
Order
21000
2100
23100
$100
per order
Scheduling Production
$1260000
Scheduling Hour
36750
5250
42000
$30
per scheduling hour
Setting Up Equipment
$3780000
Setup
26250
5250
31500
$120
per setup
Inspecting Batches
$5040000
Inspection
26250
5250
31500
$160
per inspection
Customer Related Activity Costs
$12390000
Allocation to Frequently Ordering Customer
Activity rate per cost driver
No. of cost driver
Cost Allocated
Processing Sales Orders
$100
per order
21000
$2100000
Scheduling Production
$30
per scheduling hour
36750
$1102500
Setting Up Equipment
$120
per setup
26250
$3150000
Inspecting Batches
$160
per inspection
26250
$4200000
Customer Related Activity Costs
$10,552,500
Allocation of Less frequently Ordering Customer
Activity rate per cost driver
Cost driver
No. of cost driver
Cost Allocated
Processing Sales Orders
$100
per order
2100
$210000
Scheduling Production
$30
per scheduling hour
5250
$157500
Setting Up Equipment
$120
per setup
5250
$630000
Inspecting Batches
$160
per inspection
5250
$840000
Customer Related Activity Costs
$1,837,500
Answer 2
Frequently Ordering Customers
Less frequently Ordering Customers
Sales Revenue
$46305000
$46305000
Customer Related Activity Costs
$10552500
$1837500
Profitability
$35,752,500
$44,467,500
Frequently Ordering Customer
Less frequently Ordering Customers
Sales Orders
21000
2100
Average order size
2100
21000
Total part sold
44100000
44100000
Sale price per part
$1.05
$1.05
Total Sales Revenue
$46305000
$46305000
Customer related Activity Costs
$12390000
Allocated to Frequently order customers
$6195000
Allocated to Less Frequently Ordering Customers
$6195000
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