Question 4: Lean thinking and customer profitability [14 marks] Cat and Mouse are a business that sells cat toys to retail and wholesale customers. You have been asked to provide an analysis for the management of Cat and Mouse as they are concerned that certain activities within the business are experiencing rising costs or may not be as efficient and performing as well as they could. As well as the costs noted below, the business is also experiencing a signicant increase in product returns, however they have not been able to estimate the costs of these returns to the business yet. You have been provided the following data that relates to three [3} of the largest customers of Cat and Mouse. mum Total Sales in dollars $1,200,000 $450,000 $525,000 $2,225,000 Cost of goods sold 900,000 350,000 450,000 1,?00,000 Gross profit 300,000 100,000 125,000 525,000 Nu mber of deliveries 500 240 u 000 mm Processing of orders Number of orders $100,000 Deliveries Number of deliveries 200,000 Administration costs Number of orders 12,000 Marketing costs Number of sales visits 5,000 a} 1|.r"l.ihat is the activity cost rate for each of the activities? Ensure that you show all of your workings and calculations. [4 marks] eerie cost rate Actiriir b} What are the activity costs for each of the customers? m Order processing Deiirerrcosts Marketing Total c) Based on the information you have been provided, calculate the profit for each of the customers. Fluffy Sooty Pooch Total Sales Cost of sales Gross Profit Activity costs Contribution d) Who is the least profitable customer? Explain why you think this is the case. e) You have identified that if Cat and Mouse implement a lean approach to their business, they may be able to improve the profitability of these customers. Provide Cat and Mouse with three (3) lean thinking initiatives/suggestions that they could implement that could improve the current processes of the business. Your answers need to be relevant to the Cat and Mouse business. The end