Colleen Company has gathered the following data pertaining to activities it performed for two of its major customers.Number of ordersUnits per orderSales returns:Number of returnsTotal units returnedNumber of sales callsJerry,Incorporated6KateCompany381,000420450131485Colleen sells its products at $290 per unit. The firm's gross margin ratio is 20%. Both Jerry and Kate pay their accounts promptly andno accounts receivable is over 30 days. After using business analytics software to carefully analyze the operating data for the past 30months, the firm has determined the following activity costs:ActivitySales callsOrder processingDeliveriesSales returnsSales salaryRequired:Cost Driver and Rate$800 per visit180 per order410 per order270 per return and $3 per unit returned107,000 per month1. Using customers as the cost objects, classify the activity costs into cost categories (unit-level, batch-level, etc.) and compute the totalcost for Colleen Company to service Jerry, Incorporated and Kate Company.2. Compare the profitability of these two customers.Complete this question by entering your answers in the tabs below.Required 1 Required 2Compare the profitability of these two customers. (Loss amounts should be indicated by a minus sign. Round operatingmargin (loss) to 2 decimal places (i.e. 0.2134 should be entered as 21.34%).)Net salesOperating income (loss)Operating margin (loss)Jerry,IncorporatedKate Company

Operating Income -An accounting indicator known as operating income, or income from operations,…

Colleen Company has gathered the following data pertaining to activities it performed for two of its major customers. Number of orders Units per order Sales returns: Number of returns Total units returned Number of sales calls Jerry, Incorporated 6 Kate Company 38 1,000 420 4 50 13 140 5 Colleen sells its products at $290 per unit. The firm's gross margin ratio is 20%. Both Jerry and Kate pay their accounts promptly and no accounts receivable is over 30 days. After using business analytics software to carefully analyze the operating data for the past 30 months, the firm has determined the following activity costs: Activity Sales calls Order processing Deliveries Sales returns Sales Cost Driver and Rate $800 per visit 180 per order 410 per order 270 per return and $3 per unit returned

Colleen Company has gathered the following data pertaining to activities it performed for two of its major customers. Number of orders Units per order Sales returns: Number of returns Total units returned Number of sales calls Jerry, Incorporated 6 Kate Company 38 1,000 420 4 50 13 140 5 Colleen sells its products at $290 per unit. The firm's gross margin ratio is 20%. Both Jerry and Kate pay their accounts promptly and no accounts receivable is over 30 days. After using business analytics software to carefully analyze the operating data for the past 30 months, the firm has determined the following activity costs: Activity Sales calls Order processing Deliveries Sales returns Sales Cost Driver and Rate $800 per visit 180 per order 410 per order 270 per return and $3 per unit returned

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter18: The Management Of Accounts Receivable And Inventories

Section: Chapter Questions

Problem 1P

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The following is select account information for August Sundries. Sales: $850,360; Sales Returns and Allowances: $148,550; COGS: $300,840; Operating Expenses: $45,770; Sales Discounts: $231,820. If August Sundries uses a multi-step income statement format, what is their gross margin?
Customers as a Cost Object Morrisom National Bank has requested an analysis of checking account profitability by customer type. Customers are categorized according to the size of their account: low balances, medium balances, and high balances. The activities associated with the three different customer categories and their associated annual costs are as follows: Additional data concerning the usage of the activities by the various customers are also provided: Required: (Note: Round answers to two decimal places.) 1. Calculate a cost per account per year by dividing the total cost of processing and maintaining checking accounts by the total number of accounts. What is the average fee per month that the bank should charge to cover the costs incurred because of checking accounts? 2. Calculate a cost per account by customer category by using activity rates. 3. Currently, the bank offers free checking to all of its customers. The interest revenues average 90 per account; however, the interest revenues earned per account by category are 80, 100, and 165 for the low-, medium-, and high-balance accounts, respectively. Calculate the average profit per account (average revenue minus average cost from Requirement 1). Then calculate the profit per account by using the revenue per customer type and the unit cost per customer type calculated in Requirement 2. 4. CONCEPTUAL CONNECTION After the analysis in Requirement 3, a vice president recommended eliminating the free checking feature for low-balance customers. The bank president expressed reluctance to do so, arguing that the low-balance customers more than made up for the loss through cross-sales. He presented a survey that showed that 50% of the customers would switch banks if a checking fee were imposed. Explain how you could verify the presidents argument by using ABC.
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