REVEL for Horngren's Cost Accounting: A Managerial Emphasis -- Access Card (16th Edition) (What's New in Accounting)
16th Edition
ISBN: 9780134789705
Author: Srikant M. Datar, Madhav V. Rajan
Publisher: PEARSON
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Textbook Question
Chapter 14, Problem 14.31P
Customer profitability, distribution. Green Paper Delivery has decided to analyze the profitability of five new customers. It buys recycled paper at $20 per case and sells to retail customers at a list price of $26 per case. Data pertaining to the five customers are:
Green Paper Delivery’s five activities and their cost drivers are:
| Activity | Cost-Driver Rate |
| Order taking | $90 per purchase order |
| Customer visits | $75 per customer visit |
| Deliveries | $3 per delivery mile traveled |
| Product handling | $1.20 per case sold |
| Expedited deliveries | $250 per expedited delivery |
- 1. Compute the customer-level operating income of each of the five retail customers now being examined (1, 2, 3, 4, and 5). Comment on the results.
Required
- 2. What insights do managers gain by reporting both the list selling price and the actual selling price for each customer?
- 3. What factors should managers consider in deciding whether to drop one or more of the five customers?
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Stable Paper Delivery has decided to analyze the profitability of five new customers. It buys recycled paper at $12 per case and sells to retail customers at a list price of $14.80 per case. Data
pertaining to the five customers are:
E (Click the icon to view the data.)
Stable Paper Delivery's five activities and their cost drivers are as follows:
E (Click the icon to view the activities and cost drivers.)
Read the requirements.
Requirement 1. Compute the customer-level operating income of each of the five retail
Begin by calculating each customer's gross margin. Then calculate the operating incom
minus sign for operating losses.)
Requirements
1
2
1.
Compute the customer-level operating income of each of the five retail
customers now being examined (1, 2, 3, 4, and 5). Comment on the results.
2.
What insights do managers gain by reporting both the list selling price and
the actual selling price for each customer?
3.
What factors should managers consider in deciding whether to drop one…
Fresh
Paper Delivery has decided to analyze the profitability of five new customers. It buys recycled paper at
$ 11
per case and sells to retail customers at a list price of
$14.70
per case. Data pertaining to the five customers are:
Customer
1
2
3
4
5
Cases sold
2,050
8,840
61,800
34,100
2,700
List selling price
$14.70
$14.70
$14.70
$14.70
$14.70
Actual selling price
$14.70
$14.50
$12.80
$14.18
$13.20
Number of purchase orders
16
22
39
31
34
Number of customer visits
3
2
7
4
4
Number of deliveries
18
32
69
40
34
Miles traveled per delivery
17
7
10
11
44
Number of expedited deliveries
0
0
0
0
3
pop-up content ends
ctivity
Cost Driver Rate
Order taking
$200 per purchase order
Customer visits
$50 per customer visit
Deliveries
$2 per delivery mile traveled
Product handling
$0.50 per case sold
Expedited deliveries
$310 per expedited…
Customer profitability, distribution. Best Drugs is a distributor of pharmaceutical products. Its ABC system has five activities:
Chapter 14 Solutions
REVEL for Horngren's Cost Accounting: A Managerial Emphasis -- Access Card (16th Edition) (What's New in Accounting)
Ch. 14 - Prob. 14.1QCh. 14 - Why is customer-profitability analysis an...Ch. 14 - Prob. 14.3QCh. 14 - A customer-profitability profile highlights those...Ch. 14 - Give examples of three different levels of costs...Ch. 14 - What information does the whale curve provide?Ch. 14 - A company should not allocate all of its corporate...Ch. 14 - What criteria might managers use to guide...Ch. 14 - Once a company allocates corporate costs to...Ch. 14 - A company should not allocate costs that are fixed...
Ch. 14 - How should a company decide on the number of cost...Ch. 14 - Show how managers can gain insight into the causes...Ch. 14 - How can the concept of a composite unit be used to...Ch. 14 - Explain why a favorable sales-quantity variance...Ch. 14 - How can the sales-quantity variance be decomposed...Ch. 14 - Flexible-budget variance, sales-quantity,...Ch. 14 - Sales-volume, sales-mix, and sales-quantity...Ch. 14 - Cost allocation in hospitals, alternative...Ch. 14 - Customer profitability, customer-cost hierarchy....Ch. 14 - Customer profitability, service company. Instant...Ch. 14 - Customer profitability, distribution. Best Drugs...Ch. 14 - Cost allocation and decision making. Reidland...Ch. 14 - Cost allocation to divisions. Rembrandt Hotel ...Ch. 14 - Cost allocation to divisions. Bergen Corporation...Ch. 14 - Prob. 14.25ECh. 14 - Variance analysis, working backward. The Hiro...Ch. 14 - Variance analysis, multiple products. Emcee Inc....Ch. 14 - Market-share and market-size variances...Ch. 14 - Click here to open your MyFinanceLab Study Plan...Ch. 14 - Customer profitability. Bracelet Delights is a new...Ch. 14 - Customer profitability, distribution. Green Paper...Ch. 14 - Customer profitability in a manufacturing firm....Ch. 14 - Customer-cost hierarchy, customer profitability....Ch. 14 - Allocation of corporate costs to divisions. Cathy...Ch. 14 - Cost allocation to divisions. Forber Bakery makes...Ch. 14 - Prob. 14.36PCh. 14 - Cost-hierarchy income statement and allocation of...Ch. 14 - Variance analysis, sales-mix and sales-quantity...Ch. 14 - Market-share and market-size variances...Ch. 14 - Variance analysis, multiple products. The Robins...Ch. 14 - Customer profitability and ethics. KC Corporation...
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