Question

Question 4 (1 point)

Wizard Corporation has analyzed their customer and order handling data for the past year and has determined the following costs:
Order processing cost per order	$7
Additional costs if order must be expedited (rushed)	$8.00
Customer technical support calls (per call)	$12
Relationship management costs (per customer per year)	$1200
In addition to these costs, product costs amount to 75% of Sales.
In the prior year, Wizard had the following experience with one of its customers, Chester Company:
Sales	$16,000
Number of orders	160
Percent of orders marked rush	70%
Calls to technical support	80
Required:
Calculate the profitability of the Chester Company account.

Your Answer:

Question 4 options:

Answer

Answer 1

Solution :

The loss made by the Chester Company = - $ 176.00

Thus the profitability of Chester Company = - $ 176.00

Please find the attached screenshot of the excel sheet containing the detailed calculation for the solution.

23.11.2019 - Microsoft Excel PAGE LAYOUT FORMULAS DATA REVIEW VIEW FILE HOME INSERT AB Amount 16,000.00 -12,000.00 4,000.00 -1,120.00 Statement showing calculation of profits/ loss of Chester Company Sl.No. Particulars Sales $ Less: Product Costs = 75 % of sales $ = $ 16,000 * 0.75 3 Gross Profit $ Less: Order processing cost 4 = Order processing cost per order * Number of orders $ = $ 7* 160 Less: Additional costs for orders that were expedited (rushed) = Additional costs for orders expedited (rushed) * Number of orders $ Percent of orders marked rush = $ 8 * 160 * 70 % Less: Customer technical support calls (per call) 6 = Cost per call to technical support * No. Calls to technical support = $ 12 * 80 7 Less : Relationship management costs (per customer per year) $ Net Loss $ -896.00 -960.00 -1,200.00 176.00