L9 Tutorial Questions

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Business

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Feb 20, 2024

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AYB202 TUTORIAL 9: QUESTIONS QUESTION 1 An excel workbook has been provided for this question Assume the following activity data for Martin Office Supplies. Activity Cost Driver and Rate Order taking $50 per order Product handling $0.1 per unit Delivery* $100 per trip and $3 per km Rush Delivery $300 per visit Visit to Customers $200 per visit * Delivery costs for each trip involve a fixed cost for preparing a trip and a variable cost based on KM Martin Office Supplies services the below 3 customers with sales and orders as followings: Customer A Customer B Customer C Sales (units) 40,000 40,500 58,000 Price Discount (per unit) $0.25 $0.26 $0.25 Number of orders 45 130 80 Number of Deliveries 5 15 15 Delivery KM per trip 10 2 5 Rush Delivery 1 20 12 Visit to Customers 1 12 7 Cost of Goods Sold $108,000 $109,350 $156,600 Revenue per unit is $3.50 with discounts applied depending on the volume of sales. Required: a) Customer Profitability Analysis for each customer. b) Calculate Customer Costs per dollar of Revenue and Customer Profitability ratios. c) Discuss the customer profitability of Martin Office Supplies. d) Suggest courses of action for Martin Office Supplies based on the analysis.

AYB202 TUTORIAL 9: QUESTIONS QUESTION 2 Blade Runner produces regular scooters and motorised scooters. Blade Runner scooters are considered the most reliable in the marketplace. Demand has been volatile, with huge increases in demand during the holiday season. In the past, the entity filled demand by anticipating demand increases and manufacturing inventories ahead of time. Recently, competition in the motorised scooter line has escalated, and Blade Runner needs to reduce prices to remain competitive. The motorised scooter’s current cost is $150. To be competitive, the marketing department says the price should be 10 per cent lower than the current price. Management currently determines prices on a cost-plus basis using the total cost per unit plus a 10% markup. The following per-unit costs for motorised scooters are based on production of 700 000 per year. Required a) Calculate the current selling price a. $165 b) Calculate the price recommended by the marketing department a. $148.50 c) Given the price you calculated in (b) above, calculate the target cost a. $133.65 d) Describe the next step in a Target costing process. a. Compare the target cost with the expected cost e) Explain how value-chain analysis could help Blade Runner find cost improvements a. Value-chain analysis will reveal places where blade runner can use substitutes or eliminate a process completely if it is not value adding f) Provide possible actions available to Blade Runner to help find cost improvements. a. Decreasing marketing costs if a channel is not seen to be effective

AYB202 TUTORIAL 9: QUESTIONS In class activity / Case Study During the tutorial we will be discussing the case study: “When to Drop An Unprofitable Customer” Prior to your tutorial , please read the case study, available on BB Be prepared to discuss the following questions: 1. What problems arise from a ‘spreading’ approach to customer costs? 2. What insights has the ABC approach to customer costs provided Egan? 3. What factors have made Westmid an unprofitable customer? 4. Should Egan get rid of Westmid as a customer?

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AYB202 TUTORIAL 9: QUESTIONS Additional questions: In your own time, complete the following questions from the text: Eldenburg et al., 4 th edition Chapter 16 16.2, 16.7, 16.8 16.13

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