Wizard Corporation has analyzed their customer and order handling data for the p

ID: 2764099 • 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

Additional costs if order must be expedited (rushed)

Customer technical support calls (per call)

Relationship management costs (per customer per year)

In addition to these costs, product costs amount to 75% of Sales.

In the prior year, Wizard had the following experience with one of its customers, Chester Company:

Sales

Number of orders

Percent of orders marked rush

Calls to technical support

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

Additional costs if order must be expedited (rushed)

$8.50

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 Sales.

In the prior year, Wizard had the following experience with one of its customers, Chester Company:

Sales

$16,000

Number of orders

160

Percent of orders marked rush

70%

Calls to technical support

Required:

Calculate the profitability of the Chester Company account.

sales=$16000
no of orders=160
per order=16,000/160=100
% of order marker rush=70%

Sales=$16,000
Product cost=75%*16,000=12,000
Ordering cost=160*7=1120
Additional cost=8.5*70%*160=952
Relationship manager ocst-1200

Net profit=16000-(12000+1120+952+1200)=$728
Profit margin=728/16000*100=4.55%

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