Homeware Ltd is a Hong Kong based company which produces a variety of kitchen appliances for...
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Homeware Ltd is a Hong Kong based company which produces a variety of kitchen appliances for multiple markets. The company is well known for its product design and quality. Yummy Pot, an electric cooker, is an innovative product which brings fun to home cooking and comes in 5 colours and has 15 cooking functions. The pot whistles and flashes a light when the cooking time is over. Yummy Pot is sold exclusively to three retail chains; Forward, Creations and HK Bargains; at HK$700 per unit. Each Yummy Pot has a variable cost at HK$350 per unit. The sales of the Yummy Pot have grown rapidly since the product was launched two years ago. However, its early success quickly attracted competition from other producers who are now selling similar, but cheaper, products. The senior management of Homeware Ltd has just completed a review of the sales and costs of supplying Yummy Pot to the three retail chains in 2021 and some initial findings are shown below. Units of Yummy Pot sold Trade discount given to customers (based on sales value) Number of orders received Number of standard deliveries made Number of urgent deliveries made Average miles travelled per delivery (for standard and urgent deliveries) Number of customer complaints received Number of sales visits made Activity Order taking and handling costs Standard delivery costs Urgent delivery costs Customer complaint handling costs Sales visit costs Forward 50,000 8% 500 1000 90 80 10 60 Creations 100,000 5% 500 400 40 60 20 80 HK Bargains 70,000 5% 600 350 60 70 10 50 Total activity costs In HK$ 1,600,000 2,570,000 552,000 160,000 570,000 Question continued overleaf Required: (A) Prepare a customer profitability statement for 2021 which clearly shows: i. The total profit per customer group for the year. ii. The profit per unit of Yummy Pot sold to each customer group. All relevant workings, including the calculations of cost driver rates and the assumptions made, must be clearly shown in order to gain the maximum marks. (15 marks) (B) Based on your answers to (a) above, analyse the performance of each of the customer groups and advise the managers of Homeware Ltd on the key factors that they should consider when renewing the sales and service contracts with the three customers for the sales of Yummy Pot in the next financial year. You are recommended to analyse each customer separately. You should ensure that any suggestions you make as to how Homeware Ltd manages and services its customers are specific and practical to the company. Word count guidance for Part (B): 300 - 350 words (10 marks) Homeware Ltd is a Hong Kong based company which produces a variety of kitchen appliances for multiple markets. The company is well known for its product design and quality. Yummy Pot, an electric cooker, is an innovative product which brings fun to home cooking and comes in 5 colours and has 15 cooking functions. The pot whistles and flashes a light when the cooking time is over. Yummy Pot is sold exclusively to three retail chains; Forward, Creations and HK Bargains; at HK$700 per unit. Each Yummy Pot has a variable cost at HK$350 per unit. The sales of the Yummy Pot have grown rapidly since the product was launched two years ago. However, its early success quickly attracted competition from other producers who are now selling similar, but cheaper, products. The senior management of Homeware Ltd has just completed a review of the sales and costs of supplying Yummy Pot to the three retail chains in 2021 and some initial findings are shown below. Units of Yummy Pot sold Trade discount given to customers (based on sales value) Number of orders received Number of standard deliveries made Number of urgent deliveries made Average miles travelled per delivery (for standard and urgent deliveries) Number of customer complaints received Number of sales visits made Activity Order taking and handling costs Standard delivery costs Urgent delivery costs Customer complaint handling costs Sales visit costs Forward 50,000 8% 500 1000 90 80 10 60 Creations 100,000 5% 500 400 40 60 20 80 HK Bargains 70,000 5% 600 350 60 70 10 50 Total activity costs In HK$ 1,600,000 2,570,000 552,000 160,000 570,000 Question continued overleaf Required: (A) Prepare a customer profitability statement for 2021 which clearly shows: i. The total profit per customer group for the year. ii. The profit per unit of Yummy Pot sold to each customer group. All relevant workings, including the calculations of cost driver rates and the assumptions made, must be clearly shown in order to gain the maximum marks. (15 marks) (B) Based on your answers to (a) above, analyse the performance of each of the customer groups and advise the managers of Homeware Ltd on the key factors that they should consider when renewing the sales and service contracts with the three customers for the sales of Yummy Pot in the next financial year. You are recommended to analyse each customer separately. You should ensure that any suggestions you make as to how Homeware Ltd manages and services its customers are specific and practical to the company. Word count guidance for Part (B): 300 - 350 words (10 marks)
Expert Answer:
Answer rating: 100% (QA)
PartA Units Sold Sales Revenue 35000000 50000700 17500000 50000350 Trade Discount 2800000 Order Taki... View the full answer
Related Book For
Applied Regression Analysis and Other Multivariable Methods
ISBN: 978-1285051086
5th edition
Authors: David G. Kleinbaum, Lawrence L. Kupper, Azhar Nizam, Eli S. Rosenberg
Posted Date:
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