Fresno Fiber Optics, Inc. manufactures fiber optic cables for the computer and t

Question

Fresno Fiber Optics, Inc. manufactures fiber optic cables for the computer and telecommunication industries. At the request of the company VP of marketing, the cost management staff has recently completed a customer- profitability study. The following activity-based costing information was the basis for the analysis. Customer - Related Activities Cost Driver Base Cost Driver Rate Sales activity Sales visits $860 Billing and Collection Invoices 160 Order taking Purchase orders 220 Special shipping Shipments 430 Customer - Related Activities Trace Telecom Caltex Computer Sales activity 14 visits 18 visits Billing and Collection 22 invoices 26 invoices Order taking 26 orders 28 orders Special shipping 12 shipments 14 shipments The following additional information has been compiled for Fresno Fiber Optics for two of its customers, Trace Telecom and Caltex Computer, for the most recent year. Trace Telecom Caltex Computer Sales revenue $240,000 $226,000 Cost of goods sold 140,000 110,000 General selling costs 42,000 32,000 General administrative costs 24,000 18,000 Required: 1. Prepare a customer profitability analysis for Trace Telecom and Caltex Computer. (Hint: Refer to Exhibit 5-13 for guidance). 2. Build a spreadsheet: Construct an Excel spreadsheet to solve requirement (1) above. Show how the solution will change if the following information changes: Trace Telecom's cost of goods sold was $114,000 and Caltex Computer's sales revenue was $206,000. Fresno Fiber Optics, Inc. manufactures fiber optic cables for the computer and telecommunication industries. At the request of the company VP of marketing, the cost management staff has recently completed a customer- profitability study. The following activity-based costing information was the basis for the analysis. Customer - Related Activities Cost Driver Base Cost Driver Rate Sales activity Sales visits $860 Billing and Collection Invoices 160 Order taking Purchase orders 220 Special shipping Shipments 430 Customer - Related Activities Trace Telecom Caltex Computer Sales activity 14 visits 18 visits Billing and Collection 22 invoices 26 invoices Order taking 26 orders 28 orders Special shipping 12 shipments 14 shipments The following additional information has been compiled for Fresno Fiber Optics for two of its customers, Trace Telecom and Caltex Computer, for the most recent year. Trace Telecom Caltex Computer Sales revenue $240,000 $226,000 Cost of goods sold 140,000 110,000 General selling costs 42,000 32,000 General administrative costs 24,000 18,000 Required: 1. Prepare a customer profitability analysis for Trace Telecom and Caltex Computer. (Hint: Refer to Exhibit 5-13 for guidance). 2. Build a spreadsheet: Construct an Excel spreadsheet to solve requirement (1) above. Show how the solution will change if the following information changes: Trace Telecom's cost of goods sold was $114,000 and Caltex Computer's sales revenue was $206,000.

Explanation / Answer

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Trace Telecom Activities Cost Driver Rate Amount Sales activity 14 860 12040 Billing and Collection 22 160 3520 Order taking 26 220 5720 Special shipping 12 430 5160 Total 26440

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