Globe Corporation has analyzed their customer and order handling data for the pa

Question

Globe Corporation has analyzed their customer and order handling data for the past year and has determined the following costs:

Order processing cost per order

Additional costs if order must be expedited (rushed)

Customer technical support calls (per call)

Relationship management costs (per customer per year)

In addition to these costs, product costs amount to 75%

In the prior year, Global had the following experience with one of its customers, Caroline Company:

Sales

Number of orders

Percent of orders marked rush

Calls to technical support

Required:

Calculate the profitability of the Caroline Company account.

Globe Corporation has analyzed their customer and order handling data for the past year and has determined the following costs:

Order processing cost per order

$7

Additional costs if order must be expedited (rushed)

$9.50

Customer technical support calls (per call)

$12

Relationship management costs (per customer per year)

$1200

In addition to these costs, product costs amount to 75%

In the prior year, Global had the following experience with one of its customers, Caroline Company:

Sales

$15,000

Number of orders

160

Percent of orders marked rush

.70

Calls to technical support

80

Required:

Calculate the profitability of the Caroline Company account.

Explanation / Answer

Sales = $15000

Order processing cost = 160*7=$1120

Additional expedition cost = Number of orders*% Expedited*Additional charge=160*70%*9.5=$1064

Technical support cost = 12*80=$960

Relationship management cost =$1200

Total cost = 1120+1064+960+1200=$4344

Net profit=15000-4344=$10656

Profitbaility=10656/15000=71.04%

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