Customer-Profitability Analysis: Activity-Based Costing
Fresno Fiber Optics. Inc. manufactures fiber optic cables for the computer and telecommunications industries. At the request of the company vice president of marketing. the cost management staff has recently completed a customer-profitability study. The following activity-based costing information was the basis for the analysis.
Customer-Related Activities | Cost Driver Base | Cost Driver Rate |
Sales activity. | Sales visits | $1 ,000 |
Order taking. | Purchase orders. | 200 |
Special handling. | Units handled | 50 |
Special shipping | Shipments | 500 |
Cost-driver data for two of Fresno's customers for the most recent year are
Customer-Related Activities | Trace Telecom | Caltex Computer |
Sales activity | 8visits | 6visits |
Order taking | 15orders | 20orders |
Special handling | 800 units handled . | 600 units handled |
Special shipping | 18shipments | 20shipments |
The following additional information has been compiled for Fresno Fiber Optics for two of its customers, Trace Telecom and Caltex Computer. for the most recent year:
Trace Telecom | Caltex Computer | |
Sales revenue .... | $1 90,000 . | $123,800.00 |
Cost of goods sold | 80,000 | 62,000 |
General selling costs | 24,000 . | 18,000 |
General administrative costs | 19,000 | 16,000 |
Required:
1. Prepare a customer profitability analysis for Trace Telecom and Caltex Computer. (Hint: Refer to Exhibit 5- 13 for guidance.) ,
2. Build a spreadsheet: Construct an Excel spreadsheet to solve requirement (I) above. S h ~w how the solution will change if the following information changes: Trace Telecom's sales revenue was S185,000 and Caltex Computer's cost of goods sold was S59,000.
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