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Operations Management
Colleen Company has gathered the following data pertaining to activities it performed for two of its major customers.     Jerry, Inc. Kate Co. Number of orders   6     30   Units per order   1,000     420   Sales returns:             Number of returns   4     5   Total units returned   50     140   Number of sales calls   13     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 Cost Driver and Rate Sales calls $ 800 per visit Order processing   180 per order Deliveries   410 per order Sales returns   270 per return and $3 per unit returned Sales salary   107,000 per month     Required: 1. Using customers as the cost objects, classify the activity costs into cost categories (unit-level, batch-level, etc.) and compute the total cost for Colleen Company to service Jerry, Inc. and Kate Co. 2. Compare the profitability of these two customers.

Colleen Company has gathered the following data pertaining to activities it performed for two of its major customers.     Jerry, Inc. Kate Co. Number of orders   6     30   Units per order   1,000     420   Sales returns:             Number of returns   4     5   Total units returned   50     140   Number of sales calls   13     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 Cost Driver and Rate Sales calls $ 800 per visit Order processing   180 per order Deliveries   410 per order Sales returns   270 per return and $3 per unit returned Sales salary   107,000 per month     Required: 1. Using customers as the cost objects, classify the activity costs into cost categories (unit-level, batch-level, etc.) and compute the total cost for Colleen Company to service Jerry, Inc. and Kate Co. 2. Compare the profitability of these two customers.

Practical Management Science
Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
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Colleen Company has gathered the following data pertaining to activities it performed for two of its major customers.

 

  Jerry, Inc. Kate Co.
Number of orders   6     30  
Units per order   1,000     420  
Sales returns:            
Number of returns   4     5  
Total units returned   50     140  
Number of sales calls   13     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 Cost Driver and Rate
Sales calls $ 800 per visit
Order processing   180 per order
Deliveries   410 per order
Sales returns   270 per return and $3 per unit returned
Sales salary   107,000 per month
 

 

Required:

1. Using customers as the cost objects, classify the activity costs into cost categories (unit-level, batch-level, etc.) and compute the total cost for Colleen Company to service Jerry, Inc. and Kate Co.

2. Compare the profitability of these two customers.

 

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