Delta products has determined the following costs: Order processing per order: $

Question

Delta products has determined the following costs:

Order processing per order: $6.00
Additional handling if order marked rush per order: $11.00
Customer service calls (per call) $12.00
Relationship management cost (per customer, per year) $3,500

In addition to these cos, product costs amount of 85% of sales. In the prior years, Delta had the following experience with one of its customers: Johnson Brands.

Sales: $55,000
Number of orders: 250
Percent of orders marked rush: 70%
Calls to customer service: 160

Calculate the profitability of the Johnson Brands account

Explanation / Answer

Particulars Amount Sales 55000 Costs: Production Cost 46750 Order Processing Cost 1500 Additional Handling Cost 1925 Customer Service 1920 Relationship Management Cost 3500 Total Costs 55595 Profit/(Loss) -595

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