Horngren's Cost Accounting: A Managerial Emphasis (16th Edition)
16th Edition
ISBN: 9780134475585
Author: Srikant M. Datar, Madhav V. Rajan
Publisher: PEARSON
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Chapter 14, Problem 14.30P
Customer profitability. Bracelet Delights is a new company that manufactures custom jewelry. Bracelet Delights currently has six customers referenced by customer number: 01, 02, 03, 04, 05, and 06. Besides the costs of making the jewelry, the company has the following activities:
- 1. Customer orders. The salespeople, designers, and jewelry makers spend time with the customer. The cost-driver rate is $42 per hour spent with a customer.
- 2. Customer fittings. Before the jewelry piece is completed, the customer may come in to make sure it looks right and fits properly. Cost-driver rate is $30 per hour.
- 3. Rush orders. Some customers want their jewelry quickly. The cost-diver rate is $90 per rush order.
- 4. Number of customer return visits. Customers may return jewelry up to 30 days after the pickup of the jewelry to have something refitted or repaired at no charge. The cost-driver rate is $40 per return visit.
Information about the six customers follows. Some customers purchased multiple items. The cost of the jewelry is 60% of the selling price.
- 1. Calculate the customer-level operating income for each customer. Rank the customers in order of most to least profitable and prepare a customer-profitability analysis, as in Figures 14-3 and 14-4.
Required
- 2. Are any customers unprofitable? What is causing this? What should Bracelet Delights do about these customers?
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Chapter 14 Solutions
Horngren's Cost Accounting: A Managerial Emphasis (16th Edition)
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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