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$7Additional costs if the order must be expedited (rushed) $9.50Customer technical support calls (per call)$12Relationship management costs (per customer per year) $1200In 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:SalesNumber of orders$16,000160Percent of orders marked rush 70%Calls to technical support80Calculate the profitability of the Chester Company account.

To calculate the profitability of the Chester Company account, we will determine the total costs…

Answered: Wizard Corporation has analyzed their…

Principles of Cost Accounting

17th Edition

ISBN:9781305087408

Author:Edward J. Vanderbeck, Maria R. Mitchell

Publisher:Edward J. Vanderbeck, Maria R. Mitchell

Chapter10: Cost Analysis For Management Decision Making

Section: Chapter Questions

Problem 18E

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Using the information in the previous exercises about Marleys Manufacturing, determine the operating income for department B, assuming department A sold department B 1,000 units during the month and department A reduces the selling price to the market price.
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) $10.00 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 $15,500 Number of orders 160 Percent of orders marked rush 70% Calls to technical support 80 Required: Calculate the profitability of the Chester Company account.
Caldwell Supply, a wholesaler, has determined that its operations have three primary activities: purchasing, warehousing, and distributing. The firm reports the following operating data for the year just completed: Activity Cost Driver Quantity of Cost Driver Cost per Unit of Cost Driver Purchasing Number of purchase orders 1,060 $156 per order Warehousing Number of moves 8,600 $36 per move Distributing Number of shipments 560 $86 per shipment Caldwell buys 100,600 units at an average unit cost of $16 and sells them at an average unit price of $26. The firm also has fixed operating costs of $250,600 for the year. Caldwell’s customers are demanding a 16% discount for the coming year. The company expects to sell the same amount if the demand for price reduction can be met. Caldwell’s suppliers, however, are willing to give only a 10% discount. Required:Caldwell has estimated that it can reduce the number of purchase orders to 740 and can…
Fence Industries is preparing its annual profit plan. As part of its analysis of the profitability of its customers, management estimates that the $15,000 for sales support should be assigned to the individual customers from the information given as follows: Multiple Choice Units purchased Purchase orders (annually) What is the amount of the sales support costs that should be allocated to Customer B, assuming Fence uses purchases orders to compute activity-based costs? $3,000 $6,000 $9,000 Customer A 200,000 $12,000 Customer B 300,000 32 8
Caldwell Supply, a wholesaler, has determined that its operations have three primary activities: purchasing, warehousing, and distributing. The firm reports the following operating data for the year just completed: Driver $162 per order Activity Purchasing Warehousing Distributing Cost Driver Quantity of Cost Driver Cost per Unit of Cost Number of purchase orders 1,120 Number of moves 8,100 620 Number of shipments 31 per move 92 per shipment Caldwell buys 101,200 units at an average unit cost of $11 and sells them at an average unit price of $21. The firm also has fixed operating costs of $251,200 for the year. Caldwell's customers are demanding a 11% discount for the coming year. The company expects to sell the same amount if the demand for price reduction can be met. Caldwell's suppliers, however, are willing to give only a 3% discount. Required: Caldwell has estimated that it can reduce the number of purchase orders to 800 and can decrease the cost of each shipment by $15 with minor…
Caldwell Supply, a wholesaler, has determined that its operations have three primary activities: purchasing, warehousing, and distributing. The firm reports the following operating data for the year just completed: Cost Driver Number of purchase orders Number of moves Distributing Number of shipments Activity Purchasing Warehousing Quantity of Cost Driver 1,200 8,900 700 Cost per Unit of Cost Driver $170 per order 39 per move 100 per shipment Caldwell buys 102,000 units at an average unit cost of $19 and sells them at an average unit price of $29. The firm also has fixed operating costs of $252,000 for the year. Maximum cost Caldwell's customers are demanding a 19% discount for the coming year. The company expects to sell the same amount if the demand for price reduction can be met. Caldwell's suppliers, however, are willing to give only a 13% discount. Required: Caldwell has estimated that it can reduce the number of purchase orders to 880 and can decrease the cost of each shipment by…
Dhapa
Caldwell Supply, a wholesaler, has determined that its operations have three primary activities: purchasing, warehousing, and distributing. The firm reports the following operating data for the year just completed: Activity Purchasing Warehousing Distributing Cost Driver Number of purchase orders Number of moves Number of shipments. Quantity of Cost Driver 1,040 8,400 540 Maximum cost Cost per Unit of Cost Driver $154 per order 34 per move 84 per shipment Caldwell buys 100,400 units at an average unit cost of $14 and sells them at an average unit price of $24. The firm also has fixed operating costs of $250,400 for the year. Caldwell's customers are demanding a 14% discount for the coming year. The company expects to sell the same amount if the demand for price reduction can be met. Caldwell's suppliers, however, are willing to give only a 8% discount. Required: Caldwell has estimated that it can reduce the number of purchase orders to 720 and can decrease the cost of each shipment by…
Nerrod Company sells its products at $840 per unit, net 30. The firm's gross margin ratio is 40 percent. The firm has estimated the following operating costs: Activity Cost Driver and Rate Sales calls $ 570 per visit Order processing $ 185 per order Deliveries $ 80 per order + $0.50 per mile Sales returns $ 95 per return and $6.4 restocking per unit returned Nerrod Company has gathered the following data pertaining to activities it performed for two of its customers: XBT NINTO Number of orders 27 2 Number of parts per order 670 2,170 Sales returns: Number of returns 4 10 Number of units returned 40 50 Number of sales calls 14 10 Miles per delivery 10 20 Shipping terms FOB, Factory FOB, Destination What is Nerrod's total customer unit-level cost applicable to XBT as a customer?
Recalculate the customer-level operating income using the number of written orders but at their actual $8 cost per order instead of $15 (except for DC, whose actual cost is $15 per order). How will KC Corporation evaluate customer-level operating cost performance this period?
Using the preceding information, calculate the expected customer-level operating income for the six customers of KC Corporation. Use the number of written orders at $15 each to calculate expected order costs.

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