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9. Schneider Electric manufactures power distribution equipment for commercial customers, such as hospitals and manufacturers. Activity-based costing was used to determine customer profitability. Customer service activities were assigned to individual customers, using the following assumed customer service activities, activity base, and activity rate: Customer Service Activity Bid preparation Shipment Support standard items Support nonstandard items Number of nonstandard items ordered $150 per nonstandard item Activity Base Number of bid requests Number of shipments Activity Rate $400 per request $80 per shipment $25 per standard item Number of standard items ordered Assume that the company had the following gross profit information for three representative customers: Income Statement Item Customer 1 Customer 2 Customer 3 $200,000 110,000 Revenue S120,000 $160,000 Cost of goods sold Gross profit Gross profit as a % of sales 76,800 83,200 43,200 90,000 76,800 36% 45% 48% The administrative records indicated that the activity-base usage quantities for each customer were as follows: Activity Base Number of bid requests Number of shipments Customer 1 Customer 2 Customer 3 18 34 51 30 60 48 Number of standard items ordered 15 30 50 Number of nonstandard items ordered 5 70 80 a. Prepare a customer profitability report dated for the year ended December 31, 2020, showing i. the income from operations after customer service activities. ii. the gross profit as a percent of sales. iii. the income from operations after customer service activities as a percent of sales. Prepare the report with a column for each customer. Round percentages to the nearest whole percent. b. Interpret the report in part (a). How well or poorly is the company doing and why?

9. Schneider Electric manufactures power distribution equipment for commercial customers, such as hospitals and manufacturers. Activity-based costing was used to determine customer profitability. Customer service activities were assigned to individual customers, using the following assumed customer service activities, activity base, and activity rate: Customer Service Activity Bid preparation Shipment Support standard items Support nonstandard items Number of nonstandard items ordered $150 per nonstandard item Activity Base Number of bid requests Number of shipments Activity Rate $400 per request $80 per shipment $25 per standard item Number of standard items ordered Assume that the company had the following gross profit information for three representative customers: Income Statement Item Customer 1 Customer 2 Customer 3 $200,000 110,000 Revenue S120,000 $160,000 Cost of goods sold Gross profit Gross profit as a % of sales 76,800 83,200 43,200 90,000 76,800 36% 45% 48% The administrative records indicated that the activity-base usage quantities for each customer were as follows: Activity Base Number of bid requests Number of shipments Customer 1 Customer 2 Customer 3 18 34 51 30 60 48 Number of standard items ordered 15 30 50 Number of nonstandard items ordered 5 70 80 a. Prepare a customer profitability report dated for the year ended December 31, 2020, showing i. the income from operations after customer service activities. ii. the gross profit as a percent of sales. iii. the income from operations after customer service activities as a percent of sales. Prepare the report with a column for each customer. Round percentages to the nearest whole percent. b. Interpret the report in part (a). How well or poorly is the company doing and why?

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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9. Schneider Electric manufactures power distribution equipment for commercial customers, such as hospitals and manufacturers. Activity-based costing was used to determine customer profitability. Customer service activities were assigned to individual customers, using the following assumed customer service activities, activity base, and activity rate: Customer Service Activity Bid preparation Shipment Support standard items Support nonstandard items Number of nonstandard items ordered $150 per nonstandard item Activity Base Number of bid requests Number of shipments Activity Rate $400 per request $80 per shipment $25 per standard item Number of standard items ordered Assume that the company had the following gross profit information for three representative customers: Income Statement Item Customer 1 Customer 2 Customer 3 Revenue $120,000 $200,000 $160,000 Cost of goods sold Gross profit 76,800 110,000 83,200 43,200 90,000 76,800 Gross profit as a % of sales 36% 45% 48% The administrative records indicated that the activity-base usage quantities for each customer were as follows: Activity Base Number of bid requests Customer 1 Customer 2 Customer 3 18 34 51 Number of shipments 30 60 48 Number of standard items ordered 15 30 50 Number of nonstandard items ordered 5 70 80 a. Prepare a customer profitability report dated for the year ended December 31, 2020, showing i. the income from operations after customer service activities. ii. the gross profit as a percent of sales. iii. the income from operations after customer service activities as a percent of sales. Prepare the report with a column for each customer. Round percentages to the nearest whole percent. b. Interpret the report in part (a). How well or poorly is the company doing and why?
Transcribed Image Text:9. Schneider Electric manufactures power distribution equipment for commercial customers, such as hospitals and manufacturers. Activity-based costing was used to determine customer profitability. Customer service activities were assigned to individual customers, using the following assumed customer service activities, activity base, and activity rate: Customer Service Activity Bid preparation Shipment Support standard items Support nonstandard items Number of nonstandard items ordered $150 per nonstandard item Activity Base Number of bid requests Number of shipments Activity Rate $400 per request $80 per shipment $25 per standard item Number of standard items ordered Assume that the company had the following gross profit information for three representative customers: Income Statement Item Customer 1 Customer 2 Customer 3 Revenue $120,000 $200,000 $160,000 Cost of goods sold Gross profit 76,800 110,000 83,200 43,200 90,000 76,800 Gross profit as a % of sales 36% 45% 48% The administrative records indicated that the activity-base usage quantities for each customer were as follows: Activity Base Number of bid requests Customer 1 Customer 2 Customer 3 18 34 51 Number of shipments 30 60 48 Number of standard items ordered 15 30 50 Number of nonstandard items ordered 5 70 80 a. Prepare a customer profitability report dated for the year ended December 31, 2020, showing i. the income from operations after customer service activities. ii. the gross profit as a percent of sales. iii. the income from operations after customer service activities as a percent of sales. Prepare the report with a column for each customer. Round percentages to the nearest whole percent. b. Interpret the report in part (a). How well or poorly is the company doing and why?
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