Wizard Corporation has analyzed their customer and order handling data for the p
ID: 2653857 • Letter: W
Question
Wizard Corporation has analyzed their customer and order handling data for the past year and has determined the following costs:
Order processing cost per order
$7
Additional costs if order must be expedited (rushed)
$9.00
Customer technical support calls (per call)
$12
Relationship management costs (per customer per year)
$1200
In addition to these costs, product costs amount to 75% of revenue
In the prior year, Wizard had the following experience with one of its customers, Chester Company:
Sales
$15,500
Number of orders
160
Proportion of orders marked rush
.70
Calls to technical support
80
Required:
Calculate the profitability of the Chester Company account.
Wizard Corporation has analyzed their customer and order handling data for the past year and has determined the following costs:
Order processing cost per order
$7
Additional costs if order must be expedited (rushed)
$9.00
Customer technical support calls (per call)
$12
Relationship management costs (per customer per year)
$1200
In addition to these costs, product costs amount to 75% of revenue
In the prior year, Wizard had the following experience with one of its customers, Chester Company:
Sales
$15,500
Number of orders
160
Proportion of orders marked rush
.70
Calls to technical support
80
Explanation / Answer
Profitability statement is as below:
Particulars
Amount
Sales
$15,500
Less: Costs:
Product cost ($15,500 × 75%)
$11,625
Order processing cost ($7 × 160)
$1,120
Additional cost ($9 × 0.70 × 160)
$1,008
Customers technical ($12 × 80)
$960
Relationship management cost
$1,200
Total cost
$15,913
Profit or net income
-$413
The profit is negative. It indicates loss.
Particulars
Amount
Sales
$15,500
Less: Costs:
Product cost ($15,500 × 75%)
$11,625
Order processing cost ($7 × 160)
$1,120
Additional cost ($9 × 0.70 × 160)
$1,008
Customers technical ($12 × 80)
$960
Relationship management cost
$1,200
Total cost
$15,913
Profit or net income
-$413
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.