Kingston Company produces precision components. Kingston has 11 customers, one a
ID: 2557253 • Letter: K
Question
Kingston Company produces precision components. Kingston has 11 customers, one accounts for 60% of the sales, with the remaining ten accounting for the rest of the sales. The ten smaller customers purchase components in roughly equal quantites. Orders placed by the smalled customers are about the same size. Data concerning Kingston's customer activity follows:
Order-filling costs for Kingston Company total $720,000, and sales-force costs are $600,000.
a. Determine the profitability of each of the two classes of customers (large and small). Allocate the order-filling and sales force costs to the customers based on sales volume.
b. Determine the profitability of each of the two classes of customers (large and small). Allocate the order-filling and sales force costs to the customers using an activity-based costing approach.
Larger Customer Ten Small Customers Units purchased 600,000 400,000 Orders placed 24 840 Number of sales calls 40 460 Manufacturing cost 1,800,000 1,200,000 Sales 3,600,000 2,400,000Explanation / Answer
a. Determine the profitability of each of the two classes of customers (large and small). Allocate the order-filling and sales force costs to the customers based on sales volume.
b. Determine the profitability of each of the two classes of customers (large and small). Allocate the order-filling and sales force costs to the customers using an activity-based costing approach.
Large customer small customer Sales 3600000 2400000 Manufacturing cost 1800000 1200000 Order filling cost 432000 288000 Sales force cost 360000 240000 Proift 1008000 672000Related Questions
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