Question

Ruiz Wholesalers operates at capacity and sells furniture items to four department- store chains (customers). Mr. Ruiz commented, “We apply ABC to determine product- line profitability. The same ideas apply to customer profitability, and we should find out




Activity Cost- Driver Rate
Regular order processing.......... $ 32 per regular order
Rush order processing........... $ 160 per rush order
Returned items processing.......... $ 20 per item
Catalogs and customer support ........ $ 1,000 per customer

Customers pay the transportation costs. The cost of goods sold averages 80% of sales.

Required
Determine the contribution to profit from each chain last year. Comment on yoursolution.


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  • CreatedJanuary 15, 2015
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