Clark Corporation manufactures cooling system components. The company has gathered the following information about two of its
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Sales Revenue.....................................$215,000
Cost of goods sold.................................95,000
General selling costs...............................30,000
General Admin costs..............................21,000
Midwest Refrigeration:
Sales revenue......................................$154,000
Cost of goods sold.................................68,000
General selling costs..............................21,500
General Admin costs..............................15,050
Cost-driver data used by the firm and traceable to Engle and Midwest are:
a. Perform a customer profitability analysis for Clark. Compute the gross margin and operating income on transactions related to Engle Equipment and Midwest Refrigeration.
b. Compute gross margin as a percentage of sales revenue. Then compute
(1) General selling and administrative costs as a percentage of gross margin and
(2) Total customer-related costs (i.e., costs that arise from sales visits, order taking, and special handling and shipping) as a percentage of gross margins.
c. On the basis of your calculations, which of the two customers is "more costly" to deal with? Briefly explain.
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...
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