FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Executional Cost Drivers: Internet Retailer Assume that you are a consultant for a start-up
internet retailer, Bikers.com, which provides a variety of bicycle parts and accessories in a convenient and effective customer service approach. The firm operates from an office building and nearby
warehouse located in Danville, Virginia. Currently, the firm has 10 permanent administrative staff;
6 customer service representatives who respond to customer inquiries; and 12 employees who pick,
pack, and ship customer orders. All orders are placed over the firm’s website. A toll-free telephone
number is available for customer service. The firm’s sales increased at about 20% per year in the last
two years, a decline from the 50% rate in its first three years of operation. Management is concerned
that the decline will delay the firm’s first expected profit, which had been projected to occur in the
next two years. The firm is privately held and has been financed with a combination of bank loans,
personal investments of top managers, and venture capital funding.
Required What specific executional cost drivers are important in this business? How should the firm use
them to improve its sales rate?
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