14-19 Customer profitability, distribution. Best Drugs is a distributor of pharmaceutical products. Its ABC system has...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
14-19 Customer profitability, distribution. Best Drugs is a distributor of pharmaceutical products. Its ABC system has five activities: Activity Area 1. Order processing 2. Line-item ordering 3. Store deliveries Cost Driver Rate in 2013 $42 per order $5 per line item $47 per store delivery S4 per carton 4. Carton deliveries 5. Shelf-stocking $13 per stocking-hour ASSIGNMENT MATERIAL 581 Rick Flair, the controller of Best Drugs, wants to use this ABC system to examine individual customer profit- ability within each distribution market. He focuses first on the Ma and Pa single-store distribution market. Using only two customers helps highlight the insights available with the ABC approach. Data pertaining to these two customers in August 2013 are as follows: San Diego Pharmacy TT Ann Arbor Pharmacy Total orders 13 Average line items per order 11 19 Total store deliveries Average cartons shipped per store delivery 21 18 Average hours of shelf-stacking per store delivery 0.5 0.75 Average revenue per delivery Average cost of goods sold per delivery $2,600 $1,900 $2,100 $1,700 1. Use the ABC information to compute the operating income of each customer in August 2013. Comment on the results and what, if anything, Flair should do. 2. Flair ranks the individual customers in the Ma and Pa single-store distribution market on the basis of monthly operating income. The cumulative operating income of the top 20% of customers is $58,120. Best Drugs reports operating losses of $23,670 for the bottom 40% of its customers. Make four recommenda- tions that you think Best Drugs should consider in light of this new customer-profitability information. Required 14-19 Customer profitability, distribution. Best Drugs is a distributor of pharmaceutical products. Its ABC system has five activities: Activity Area 1. Order processing 2. Line-item ordering 3. Store deliveries Cost Driver Rate in 2013 $42 per order $5 per line item $47 per store delivery S4 per carton 4. Carton deliveries 5. Shelf-stocking $13 per stocking-hour ASSIGNMENT MATERIAL 581 Rick Flair, the controller of Best Drugs, wants to use this ABC system to examine individual customer profit- ability within each distribution market. He focuses first on the Ma and Pa single-store distribution market. Using only two customers helps highlight the insights available with the ABC approach. Data pertaining to these two customers in August 2013 are as follows: San Diego Pharmacy TT Ann Arbor Pharmacy Total orders 13 Average line items per order 11 19 Total store deliveries Average cartons shipped per store delivery 21 18 Average hours of shelf-stacking per store delivery 0.5 0.75 Average revenue per delivery Average cost of goods sold per delivery $2,600 $1,900 $2,100 $1,700 1. Use the ABC information to compute the operating income of each customer in August 2013. Comment on the results and what, if anything, Flair should do. 2. Flair ranks the individual customers in the Ma and Pa single-store distribution market on the basis of monthly operating income. The cumulative operating income of the top 20% of customers is $58,120. Best Drugs reports operating losses of $23,670 for the bottom 40% of its customers. Make four recommenda- tions that you think Best Drugs should consider in light of this new customer-profitability information. Required
Expert Answer:
Answer rating: 100% (QA)
Solution Best Drugs 1 Customer Profitability review Month August 2013 Ann Arbor Pharmacy Details Cos... View the full answer
Related Book For
Horngrens Accounting
ISBN: 978-0133855371
10th Canadian edition Volume 1
Authors: Tracie L. Miller-Nobles, Brenda L. Mattison, Ella Mae Matsumura, Carol A. Meissner, Jo-Ann L. Johnston, Peter R. Norwood
Posted Date:
Students also viewed these accounting questions
-
Michelle owns appreciated property and she wants to use this property to start a business with her son, Lance. Michelle is considering making a contribution of the property to a newly organized...
-
The Ma & Pa Grocery Store has never kept many records. The proceeds from sales are used to pay suppliers for goods delivered. When the owners, Donald and Alicia Wride, need some cash, they withdraw...
-
Customer profitability is influenced by the activities that customers consume. Indicate whether each activity listed in the following table would be associated with a high cost-to-serve customer or a...
-
Paul made the following acquisitions and disposals of ordinary shares in Crimmon plc: No further shares were acquired during 2020. Against which acquisitions will each of the above disposals be...
-
The population distribution in the United States based on race/ethnicity and blood type as reported by the American Red Cross is given here. a. A volunteer blood donor walks into a Red Cross blood...
-
1. Jordon James started JJJ Consulting on January 1. The following are the account balances at the end of the first month of business, before adjusting entries were recorded. Accounts...
-
A heat pump works on the principle of the (a) First law of thermodynamics (b) Second law of thermodynamics (c) Zeroth law of thermodynamics (d) Third law of thermodynamics.
-
1. Create a service blueprint of the procedure and identify opportunities for improvement. 2. Describe what elements of a services cape would make this service more palatable to the customer and...
-
a B 0 b A Note: Triangle may not be drawn to scale. Suppose a 168 and 6 = 95. Find an exact value (report answer as a fraction). You will need to determine the length of the missing side first....
-
Consider the deterministic world below (part (a)). Allowable moves are shown by arrows, and the numbers indicate the reward for performing each action. If there is no number, the reward is zero....
-
Question 9 Humans aren't the only animals that get cancer; other organisms get tumors, as well, and their risk may be influenced by environmental factors. An ecologist decides to study whether...
-
Explain the difference between deductive and inductive statistics. Illustrate your answer with examples taken from everyday life.
-
A popular commercial claims that Four out of five dentists prefer sugarless gum. Is this conclusion drawn from a sample or a population?
-
A teacher has just given an algebra exam. What are some of the statistics she could compute?
-
Suppose a Gallup poll is to be conducted to predict the outcome of the 1992 presidential election. Should the pollsters survey a sample or a population?
-
State which type of statistical problem (deductive or inductive) makes each of the following assumptions. (a) You know what the population characteristics are. (b) You know what the sample...
-
write a program that receives the ASCII code value of the integer type and the alphabet character from the user, and prints the ASCII code character of the corresponding integer and the ASCII code...
-
The following processes constitute the air-standard Diesel cycle: 12: isentropic compression,23: constant-volume energy addition (T and P increase),34: constant-pressure energy addition (v...
-
Redwing Floor Covering reported the following summarized data at December 31, 2017. Accounts appear in no particular order. Revenue .........................$32,000 Other Liabilities...
-
The head office of Worldwide Circuits wants to "go green" and reduce paper use and unnecessary reports. Which features of an effective accounting information system will allow for this initiative?...
-
The payroll records of Radii Video Productions Inc. provide the following information for the weekly pay period ended September 21: Tally Allard and George White work in the office, and Molly Dodge...
-
Find each probability using the standard normal distribution. (a) \(P(z>-1.68)\) (b) \(P(z <2.23)\) (c) \(P(-0.47
-
Are you more likely to randomly select one person with an IQ score greater than 105 or are you more likely to randomly select a sample of 15 people with a mean IQ score greater than 105? Explain. In...
-
What is the lowest score that would still place a person in the top \(5 \%\) of the scores? In a standardized IQ test, scores are normally distributed, with a mean score of 100 and a standardized...
Study smarter with the SolutionInn App