document.write( "Question 856521: Towels & More
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\n" ); document.write( "\n" ); document.write( "For the year ended 12-31-XX
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\n" ); document.write( "\n" ); document.write( "Sales
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\n" ); document.write( "$600,000
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\n" ); document.write( "\n" ); document.write( "Variable Production Costs
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\n" ); document.write( "180,000
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\n" ); document.write( "\n" ); document.write( "Contribution Margin
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\n" ); document.write( "$420,000
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\n" ); document.write( "\n" ); document.write( "Fixed Costs:
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\n" ); document.write( "\n" ); document.write( "Production Overhead
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\n" ); document.write( "$120,000
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\n" ); document.write( "\n" ); document.write( "Sellling & Distribution Costs
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\n" ); document.write( "240,000
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\n" ); document.write( "Fixed costs total: $360,000
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\n" ); document.write( "\n" ); document.write( "Net Operating Income
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\n" ); document.write( "$60,000
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\n" ); document.write( "\n" ); document.write( "Customer support & distribution costs are pretty high at T&M. The total amount was $240,000 last year. The marketing manager has recently been to a seminar and learned about applying ABC to analyze customer and distribution costs. He suggests that the company analyze overhead costs associated with supporting different types of customers before proceeding with an expansion. The marketing manager knows that the small shops require a lot of attention and is somewhat dubious about the CEO's proposed strategy. The CEO accepts the suggestion and you are brought in as a consultant to prepare the analysis. The table below provides some information that may be pertinent for the analysis.\r
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\n" ); document.write( "\n" ); document.write( "Description
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\n" ); document.write( "sales(units) 10,000 5,000 5,000
\n" ); document.write( " revenue $200,000 $100,000 $300,000
\n" ); document.write( " contribution
\n" ); document.write( " margin ratio 50% 80% 80%
\n" ); document.write( " #customers 5 45 250
\n" ); document.write( " total costs/No. of orders places: $40,000 10 90 900
\n" ); document.write( " total costs/No. of sales calls: $80,000 5 195 800
\n" ); document.write( " total costs/No. of shipments $120,000 20 480 1,000
\n" ); document.write( " Calculate the customer support and distribution costs associated with the three types of customers.
\n" ); document.write( " Use a simple strategy first and allocate the costs based on revenues.
\n" ); document.write( " Recalculate the allocations using activity based costing (ABC).
\n" ); document.write( " Determine contribution margin less customer support and distribution costs for both approaches above.
\n" ); document.write( " Which type of customer should the company support and why? Refer to your analysis in your response. \n" ); document.write( "

Algebra.Com's Answer #516028 by ewatrrr(24785) $\"\"$ $\"About$

You can put this solution on YOUR website!

 
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document.write( "Hi,
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document.write( "My recommendation would be to set up a table on a spread sheet
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document.write( "that makes sense to You and repost
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document.write( "For Example Purposes only:
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document.write( "C	S	R	C-O 	C-Call	C-shipments
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document.write( "5	$10,000	$200,000	$40,000	$80,000	$120
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document.write( "45	$5,000	$100,000	$1,090	$5,195	$20,480
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document.write( "250	$5,000	$300,000	$900	$800	$1,000\r
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