Activity-Based Costing and Customer Profitability Prepare a customer profitabili
ID: 2481681 • Letter: A
Question
Activity-Based Costing and Customer Profitability
Prepare a customer profitability report dated for the year ended December 31, 2014, showing (1) the income from operations after customer service activities, (2) the gross profit as a percent of sales, and (3) the income from operations after customer service activities as a percent of sales. Prepare the report with a column for each customer. Round percentages to the nearest whole percent. Enter all amounts as positive numbers.
Schneider Electric
Customer Profitability Report
For the Year Ended December 31, 2014
Customer 1
Customer 2
Customer 3
Revenue
Correct 8
Correct 9
Correct 10
Cost of goods sold
Correct 12
Correct 13
Correct 14
Gross profit
Correct 16
Correct 17
Correct 18
Customer service activities:
Bid preparation
Correct 21
Correct 22
Correct 23
Shipment
Correct 25
Correct 26
Correct 27
Support standard items
Correct 29
Correct 30
Correct 31
Support nonstandard items
Correct 33
Correct 34
Correct 35
Total customer service activities
Correct 37
Correct 38
Correct 39
Income from operations after customer service activities
Correct 41
Correct 42
Correct 43
Gross profit as a percent of sales
Correct 45
Correct 46
Correct 47
Income from operations after customer service activities as a percent of sales
Prepare a customer profitability report dated for the year ended December 31, 2014, showing (1) the income from operations after customer service activities, (2) the gross profit as a percent of sales, and (3) the income from operations after customer service activities as a percent of sales. Prepare the report with a column for each customer. Round percentages to the nearest whole percent. Enter all amounts as positive numbers.
Schneider Electric
Customer Profitability Report
For the Year Ended December 31, 2014
Customer 1
Customer 2
Customer 3
Revenue
$Correct 8
$Correct 9
$Correct 10
Cost of goods sold
Correct 12
Correct 13
Correct 14
Gross profit
$Correct 16
$Correct 17
$Correct 18
Customer service activities:
Bid preparation
$Correct 21
$Correct 22
$Correct 23
Shipment
Correct 25
Correct 26
Correct 27
Support standard items
Correct 29
Correct 30
Correct 31
Support nonstandard items
Correct 33
Correct 34
Correct 35
Total customer service activities
$Correct 37
$Correct 38
$Correct 39
Income from operations after customer service activities
$Correct 41
$Correct 42
$Correct 43
Gross profit as a percent of sales
%Correct 45
%Correct 46
%Correct 47
Income from operations after customer service activities as a percent of sales
Explanation / Answer
Schneider Electric
Customer Profitability Report
For the Year Ended December 31, 2014
Customer 1
Customer 2
Customer 3
Revenue (A)
$ 39,000
$ 26,000
$ 31,200
Cost of goods sold (B)
$ 24,180
$ 13,520
$ 15,600
Gross profit (C) = A-B =
$ 14,820
$ 12,480
$ 15,600
Customer service activities:
Bid preparation
$ 2,400
$ 1,600
$ 5,000
(12 bids*$200)
(8 bids*$200)
(25 bids*$200)
Shipment
$ 256
$ 384
$ 720
(16 Shipments *$16)
(24 Shipments *$16)
(45 Shipments *$16)
Support standard items
$ 960
$ 760
$ 1,120
(48 Items*$20)
(38 Items*$20)
(56 Items*$20)
Support nonstandard items
$ 1,350
$ 2,250
$ 4,050
(18 Items*$75)
(30 Items*$75)
(54 Items*$75)
Total customer service activities (D)
$ 4,966
$ 4,994
$ 10,890
Income from operations after customer service activities (E) = C-D =
$ 9,854
$ 7,486
$ 4,710
Gross profit as a percent of sales = C / A =
38%
48%
50%
Income from operations after customer service activities as a percent of sales = E / A =
25%
29%
15%
Schneider Electric
Customer Profitability Report
For the Year Ended December 31, 2014
Customer 1
Customer 2
Customer 3
Revenue (A)
$ 39,000
$ 26,000
$ 31,200
Cost of goods sold (B)
$ 24,180
$ 13,520
$ 15,600
Gross profit (C) = A-B =
$ 14,820
$ 12,480
$ 15,600
Customer service activities:
Bid preparation
$ 2,400
$ 1,600
$ 5,000
(12 bids*$200)
(8 bids*$200)
(25 bids*$200)
Shipment
$ 256
$ 384
$ 720
(16 Shipments *$16)
(24 Shipments *$16)
(45 Shipments *$16)
Support standard items
$ 960
$ 760
$ 1,120
(48 Items*$20)
(38 Items*$20)
(56 Items*$20)
Support nonstandard items
$ 1,350
$ 2,250
$ 4,050
(18 Items*$75)
(30 Items*$75)
(54 Items*$75)
Total customer service activities (D)
$ 4,966
$ 4,994
$ 10,890
Income from operations after customer service activities (E) = C-D =
$ 9,854
$ 7,486
$ 4,710
Gross profit as a percent of sales = C / A =
38%
48%
50%
Income from operations after customer service activities as a percent of sales = E / A =
25%
29%
15%
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