Reference no: EM133125924
Question 1 - MNOP plc is an IT consultancy that provides IT advice to a range of clients.
MNOP classifies its customers into four main categories.
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M
|
N
|
O
|
P
|
|
Sales value
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$1397
|
$3003
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$822
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$1052
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MNOP employs 10 full-time IT specialists who each deliver 1,500 chargeable hours per year and who are paid $60,000 per year.
MNOP has estimated its other costs as follows:
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Costs
|
|
Telephone support
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$950
|
|
After-sales service
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$1349
|
|
Client meetings
|
$356
|
|
$2655
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MNOP has reviewed its existing client database and determine the following four average profiles of typical clients:
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M
|
N
|
O
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P
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Total
|
|
Number of telephone queries
|
44
|
420
|
52
|
237
|
753
|
|
Number of visits
|
5
|
29
|
6
|
9
|
49
|
|
Number of meetings
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72
|
75
|
27
|
95
|
269
|
|
Chargeable hours
|
5
|
6
|
3
|
2
|
16
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Previously MNOP used a single cost rate of $293 per hour for both in-house profit reporting and quotations for new contracts.
Compute and compare the profitability of each customers. Enter the highest profitability in net margin per sales dollars (in %, two decimal points) using an activity-based system of attributing costs.
Question 2 - Taylors Cheesecakes supplies cheesecakes to three large supermarket chains. Management has become concerned about the rising costs associated with the processing and dispatch of orders. An activity analysis of the indirect costs identified the following customer-related costs:
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|
|
|
Customer use of cost driver
|
|
Activity cost pool
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Cost driver
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Est. indirect costs
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Exp. Use of cost driver
|
1
|
2
|
3
|
|
Orders processing
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No. orders
|
$295,000
|
414
|
184
|
104
|
126
|
|
Returns processing
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No. returns
|
$48,000
|
105
|
26
|
58
|
21
|
|
Delivery
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No. deliveries
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$83,000
|
746
|
298
|
152
|
296
|
|
Rush orders
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No. rush orders
|
$83,000
|
43
|
8
|
24
|
11
|
|
Sales visits
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No. visits
|
$21,000
|
72
|
27
|
31
|
14
|
Sales are always marked up 40% on cost. The sales mix for the three customers in the period of investigation is as follows: Customer 1 - $866,000; Customer 2 - $372,000; Customer 3 - $362,000. Compute the highest contribution margin for the three customers and enter the amount.
Question 3 - Family Supermarkets (FS) has decided to increase the size of its Adelaide store. It wants information about the profitability of individual product lines: soft drinks, fresh produce and packaged food. FS provides the following data for 2020 for each product line:
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Soft drinks
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Fresh produce
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Packaged food
|
|
Revenues
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$317,400
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$840,240
|
$483,960
|
|
Cost of goods sold
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$240,000
|
$600,000
|
$360,000
|
|
Cost of bottles returned
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$4,800
|
$0
|
$0
|
|
Number of purchase orders placed
|
101
|
178
|
155
|
|
Number of deliveries received
|
147
|
143
|
97
|
|
Hours of shelf-stocking time
|
1018
|
1067
|
1439
|
|
Items sold
|
5527
|
4530
|
6752
|
FS also provides the following information for 2020:
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Activity
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Description of activity
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Total support costs
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Cost-allocation base
|
|
Bottle returns
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Returning of empty bottles to store
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$4,800
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Direct tracing to soft drink line
|
|
Ordering
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Placing of orders for purchases
|
$62,400
|
434 purchase orders
|
|
Delivery
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Physical delivery and receipt of merchandise
|
$100,800
|
387 deliveries
|
|
Shelf-stocking
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Stocking of merchandise on store shelves and ongoing restocking
|
$69,120
|
3524 hours of shelf-stocking time
|
|
Customer support
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Assistance provided to customers, including checkout and bagging
|
$122,880
|
16809 items sold
|
|
Total
|
|
$360,000
|
|
FS currently allocates store support costs (all costs other than cost of goods sold) to product lines on the basis of cost of goods sold of each product line. If FS allocates store support costs (all costs other than cost of goods sold) to product lines using an ABC system, calculate and enter the amount of difference in operating profit as a percentage of revenues for Soft drinks.
Question 4 - Family Supermarkets (FS) has decided to increase the size of its Adelaide store. It wants information about the profitability of individual product lines: soft drinks, fresh produce and packaged food. FS provides the following data for 2020 for each product line:
|
Soft drinks
|
Fresh produce
|
Packaged food
|
|
Revenues
|
$317,400
|
$840,240
|
$483,960
|
|
Cost of goods sold
|
$240,000
|
$600,000
|
$360,000
|
|
Cost of bottles returned
|
$4,800
|
$0
|
$0
|
|
Number of purchase orders placed
|
245
|
231
|
128
|
|
Number of deliveries received
|
158
|
292
|
219
|
|
Hours of shelf-stocking time
|
988
|
1363
|
399
|
|
Items sold
|
95918
|
116757
|
53372
|
FS also provides the following information for 2020:
|
Activity
|
Description of activity
|
Total support costs
|
Cost-allocation base
|
|
Bottle returns
|
Returning of empty bottles to store
|
$4,800
|
Direct tracing to soft drink line
|
|
Ordering
|
Placing of orders for purchases
|
$62,400
|
604 purchase orders
|
|
Delivery
|
Physical delivery and receipt of merchandise
|
$100,800
|
669 deliveries
|
|
Shelf-stocking
|
Stocking of merchandise on store shelves and ongoing restocking
|
$69,120
|
2750 hours of shelf-stocking time
|
|
Customer support
|
Assistance provided to customers, including checkout and bagging
|
$122,880
|
266047 items sold
|
|
Total
|
|
$360,000
|
|
FS currently allocates store support costs (all costs other than cost of goods sold) to product lines on the basis of cost of goods sold of each product line. If FS allocates store support costs (all costs other than cost of goods sold) to product lines using an ABC system, calculate and enter the amount of difference in operating profit as a percentage of revenues for Fresh product.
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