Emery Company sells small machine parts to heavy equipment manufacturers for an average price of $1.05 per
Question:
* This cost does not include the cost of the following €œcustomer-related€ activities:
Customer-related activity costs:
Processing sales orders............ $ 2,310,000
Scheduling production............ 1,260,000
Setting up equipment............. 3,780,000
Inspecting batches.............. 5,040,000
Total....................$12,390,000
Required:
1. Assign the customer-related activity costs to each category of customers in proportion to the sales revenue earned by each customer type. Calculate the proï¬tability of each customer type. Discuss the problems with this measure of customer proï¬tability.
2. Assign the customer-related activity costs to each customer type using activity rates. Now calculate the proï¬tability of each customer category. As a manager, how would you use this information?
Step by Step Answer:
Cornerstones of Cost Management
ISBN: 978-1285751788
3rd edition
Authors: Don R. Hansen, Maryanne M. Mowen