Wizard Corporation has analyzed their customer and order handling data for the p

Question

Wizard 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) $8.00 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% of Sales. In the prior year, Wizard had the following experience with one of its customers, Chester Company: Sales $16,000 Number of orders 160 Percent of orders marked rush 70% Calls to technical support 80

Explanation / Answer

Chester Company Profitability Statement for Previous Year All Amounts in $ Sales 16000 Costs incurred Product Costs 12000 Order Processing Costs 1120 Additional Costs for Rush Order 896 Technical Support Cost 960 Relationship Management Costs 1200 16176 Net Loss for the year -176

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