edugen wleypln Problem 8-12 Duffy Dog Conference Solutions specializes in the de
ID: 2509317 • Letter: E
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edugen wleypln Problem 8-12 Duffy Dog Conference Solutions specializes in the design and installation of estimates product cost and direct labor for installers and marks up the total cost by 30 percent. On a recent job s for large corporations. When bidding on jobs, the company for Orvieto Product costs including podiums, seating, lighting, etc. $173,500 25,000 198,500 59,550 $258,050 Installer salaries Total Markup at 30 percent Bid price The job turned out to be a big hassle. Orvieto requested 24 change orders, although the dollar value of the products it requested changed very litle. The company also returned 33 items that had extremely minor flaws (scratches that were barely visible and would be expected in normal shipping). Orvieto also requested seven meetings with designers taking 43 hours before its plan was finalized. Normally, only two or three meetings are necessary Alison Jackson, controller for Duffy Dog, decided to conduct a customer profitability analysis to determine the profinability of Orvieto. She grouped support costs into three categories with the following drivers: Driver Change orders Number of returns Annual Value of Driver 866 change orders 930 product returns 1,221 meeting hours Annual Cost $230,356 70,680 70,818 Design meeting hours Duffy Dog Conference Solutions has decided to adopt an activity-based pricing scheme. On future jobs, the company will charge a 30 percent markup on the sum of product costs plus installer salaries. In addition, the company will charge $270 per change order, $95 per product return for products that are in excellent condition, and $83 per meeting hour with a Duffy Dog conference room designer What would the profit be on the orderf Profit / (Loss) s O Type here to searchExplanation / Answer
What would the profit be on the order from Orvieto?
Profit / (Loss) $ 61,348
Product costs including podiums, seating, lighting,etc $173,500
Installer salaries $25,000
Total $ 198,500
Markup at 30% $ 59,550
Cost of a single change order $270
Cost of a single return $95
Cost of a single design meeting hour $83
Cost of a change order $266
Cost of a return $76
Cost of a design meeting hour $58
Difference of cost of a change order $270-$266 $4
Difference of cost of a return $95-$76 $19
Difference of cost of a design meeting hour $83-$58 $25
Change order of 24 24 x $4 $96
Number of returns of 33 33 x $19 $627
Design meeting hours of 43 43 x $25 $1,075
Difference of Total Cost $1,798
Markup at 30% $59,550
Total Cost $ 61,348
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