Yankee Spices is a medium- sized manufacturer of a wide variety of spices sold into two main segments of the market : direct to grocery store chains and to restaurants through a wholesaler network. The size of the bottle of spices is the main difference in the two markets, with larger containers made of plastic used for restaurants, and smaller bottles made of glass for the retail market. While prices vary for a bottle of spices, the average price is $4.79 for the retail market and $17.25 for the wholesale market. In each segment, Yankee Spices has four major customers that account for 80% of its sales and then a collection of smaller customers that make up the remaining 20% of its sales. The operating costs for the retail segment are $2,750,000 with an asset base of $7,500,000. The operating costs for the wholesale segment are $4,800,000 with an asset base of $10,400,000.

The two spice segments combine to make up the spice division of the parent company. The spice division’s operating costs are $4,575,000 per year with a total asset base of $20,600,000. The company has adopted activity-based costing (ABC) for its customer analysis. The data the company makes available to you is in the table below.

REQUIRED:

a. Do a customer profitability analysis using the ABC data to derive the non materials costs for each customer.

b. Given the results of your customer profitability analysis, complete the segment profitability analyses. This should include an ROA calculation.

c. Given the results of your segment profitability analysis, complete the profitability analysis for the division. This should include an ROA calculation.

d. What does this information tell you about the spices division? Is it making a sufficient ROA?

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Yankee Spices Customer Profitability Data Retail Segment Wholesadle (restaurant) Segment ShopWell ABCFood MCarthy's TideWell Spices Ohher 20% Wholesale Wholesaling Spices Jopes Tompkins Wholesale Other 20% Quan Markets Stores Markets Stores Toids Revenue SZ706,330 S2,5,500 S2874,000 S759,500 S2,760,000 S3O8 750 S4,623000 S6,900,000 S2935,800 Raw Materials S574,800 S643,716 SL99,048 SLO34,640 SI37,520 S1242,000 S1358,438 S2,080,30 305000 SE509,347 Orders placed 3250 4,250 4,850 5,050 6,000 6,500 5,500 6,000 5,500 300 S0,000 Orders picked/ packed 3900 4,500 4,800 5,430 6,600 7,200 7,500 8,700 6,900 4470 60,000 Orders shipped 5,00 5,400 6,375 6,075 6,750 9,75 8,400 9,600 6,25 75,000 Invoices sent 8,375 9,375 9,500 D,875 5,65 V,000 4,000 TL875 Z5000 Calls made 2450 2,75 2,520 2,730 3,535 4,375 5,285 4,375 5,250 2205 35,000 Yankee Spices Activity-Based Data Activity Cost Driver Driver Frequency Moving materials Taking orders S75,000 Row material Ss $250,000 Orders $B.509,347 50,000 Picking and packing Shipping SZO,000 Orders picked S300,000 Orders shipped $350,000 Invoices 60,000 75,000 25,000 Invoicing $200,000 Calls $500,000 Revenue $'s Customer service 35,000 General overheod $29 335,800