Question to replace question 4 on midterm) Oing Qing Enterprises Lid is a wholesaler that provides a variety of products to retailers in Manitoba and Saskatchewan Now owners purchased Qing Qing, and are unhappy with the internal reports available to them. One concern is that there is no process in place to evaluate the profitability of individual customers The following information has been gathered a) When an order is received from a customer, the credit status of the customer must be checked before the order is accepted. Once accepted, the items ordered are entered into the system and the quantities ordered compared to the quantities on band. A picking document is created for the warehouse staff, listing the quantity ordered or on band, whichever is fewer b) Warehouse staff then retrieve the inventory items from the warehouse and packages them on pallets for shipment. The pallets are then shipped to the customers using Oing Qing trucks. There are established routes, so that each location has inventory delivered once per week. Shipments in Manitoba are made Monday, Wednesdays and Fridays, with Saskatchewan shipments occurring on Tuesdays and Thursdays. If the customer requires a shipment between normal shipping dates, it can normally be accommodated but requires the driver to extend the route on the shipping date nearest the customer, which lengthens the trip significantly. The cost is dependent upon the extra time taken to deliver to the customer who placed the nash order c) Customer support is provided through salespeople, cach customer has a specific salesperson assigned Meetings with salespeople have been carried out online during Cavid Sh Shop SI Sie SO Two customers have been selected for evaluation, and totals have been cakulated for the year ended September 30, 2021 Gillespie's Lid purchased items with a selling price of 5210,000 from Qing Qing Qing Qing paid $130,000 to acquire these inventory items. Claridge Corp purchased items with a selling price of $80,000 from Qing Qing Qing Qing paid S42.000 for these items. The difference in gross profit earned from each customer is due to Gillespie's receiving a discount in selling price for purchasing more than $200,000 during the year, The following information was gathered on the use of each cost driver by each customer CH EACH Required: 2 a) If activity-based costing is to be used to assign costs to customers, should the order acceptance and order processing functions be considered one activity or two? Explain your reasoning 3.5 b) Calculate the cost per unit of east driver for each activity pool 8.5 c) Calculate the gross profit and overall profitability of Gillespie's and of Claridge, separately. Which customer is the more desirable customer for Oing Oing! 2 d) Provide one reasonable suggestion to management to make the less desirable of the two customers more profitable Explain how this can be presented to the customer in a way that will reduce the probability the customer will change to another supplier Question A (to replace question 4 on midterm) Qing Qing Enterprises Ltd. is a wholesaler that provides a variety of products to retailers in Manitoba and Saskatchewan. New owners purchased Qing Qing, and are unhappy with the internal reports available to them. One concern is that there is no process in place to evaluate the profitability of individual customers. The following information has been gathered: a) When an order is received from a customer, the credit status of the customer must be checked before the order is accepted. Once accepted, the items ordered are entered into the system and the quantities ordered compared to the quantities on hand. A picking document is created for the warehouse staff, listing the quantity ordered or on hand, whichever is fewer. b) Warehouse staff then retrieves the inventory items from the warehouse and packages them on pallets for shipment. The pallets are then shipped to the customers using Qing Qing trucks. There are established routes, so that each location has inventory delivered once per week. Shipments in Manitoba are made Mondays, Wednesdays and Fridays, with Saskatchewan shipments occurring on Tuesdays and Thursdays. If the customer requires a shipment between normal shipping dates, it can normally be accommodated but requires the driver to extend the route on the shipping date nearest the customer, which lengthens the trip significantly. The cost is dependent upon the extra time taken to deliver to the customer who placed the rush order. c) Customer support is provided through salespeople; each customer has a specific salesperson assigned. Meetings with salespeople have been carried out online during Covid. Activity Total cost of activity Cost driver Order acceptance $27,000 of orders received Order entry $63,000 8 of different products Picking inventory $162,000 # of different products Packing for shipment $81.000 8 of pallets delivered Shipping costs $168,000 5 of kms driven Rush shipments $10,000 of hours to customer Salesperson support $300,000 of customers Total overhead costs 5811.000 Total volume of cost driver 6,000 180.000 180,000 9,000 150,000 200 240 Two customers have been selected for evaluation, and totals have been calculated for the year ended September 30, 2021. Gillespie's Ltd. purchased items with a selling price of $210,000 from Qing Qing. Qing Qing paid $130,000 to acquire these inventory items. Claridge Corp. purchased items with a selling price of $80,000 from Qing Qing. Qing Qing paid S42,000 for these items. The difference in gross profit earned from each customer is due to Gillespie's receiving a discount in selling price for purchasing more than $200,000 during the year. The following information was gathered on the use of each cost driver by each customer. Cost driver activity Gillespie's Claridge # of orders received from Average # of different products purchased on EACH order Average # of pallets sent for EACH order 1 #ofkms driven to deliver EACH order Total time taken for delivery of rush orders in year 52 20 25 100 3 500 0 600 16 Required: 2 a) If activity-based costing is to be used to assign costs to customers, should the order acceptance and order processing functions be considered one activity or two? Explain your reasoning. 3.5 b) Calculate the cost per unit of cost driver for each activity pool. 8.5 c) Calculate the gross profit and overall profitability of Gillespie's and of Claridge, separately. Which customer is the more desirable customer for Qing Qing? 2 d) Provide one reasonable suggestion to management to make the less desirable of the two customers more profitable. Explain how this can be presented to the customer in a way that will reduce the probability the customer will change to another supplier. Question to replace question 4 on midterm) Oing Qing Enterprises Lid is a wholesaler that provides a variety of products to retailers in Manitoba and Saskatchewan Now owners purchased Qing Qing, and are unhappy with the internal reports available to them. One concern is that there is no process in place to evaluate the profitability of individual customers The following information has been gathered a) When an order is received from a customer, the credit status of the customer must be checked before the order is accepted. Once accepted, the items ordered are entered into the system and the quantities ordered compared to the quantities on band. A picking document is created for the warehouse staff, listing the quantity ordered or on band, whichever is fewer b) Warehouse staff then retrieve the inventory items from the warehouse and packages them on pallets for shipment. The pallets are then shipped to the customers using Oing Qing trucks. There are established routes, so that each location has inventory delivered once per week. Shipments in Manitoba are made Monday, Wednesdays and Fridays, with Saskatchewan shipments occurring on Tuesdays and Thursdays. If the customer requires a shipment between normal shipping dates, it can normally be accommodated but requires the driver to extend the route on the shipping date nearest the customer, which lengthens the trip significantly. The cost is dependent upon the extra time taken to deliver to the customer who placed the nash order c) Customer support is provided through salespeople, cach customer has a specific salesperson assigned Meetings with salespeople have been carried out online during Cavid Sh Shop SI Sie SO Two customers have been selected for evaluation, and totals have been cakulated for the year ended September 30, 2021 Gillespie's Lid purchased items with a selling price of 5210,000 from Qing Qing Qing Qing paid $130,000 to acquire these inventory items. Claridge Corp purchased items with a selling price of $80,000 from Qing Qing Qing Qing paid S42.000 for these items. The difference in gross profit earned from each customer is due to Gillespie's receiving a discount in selling price for purchasing more than $200,000 during the year, The following information was gathered on the use of each cost driver by each customer CH EACH Required: 2 a) If activity-based costing is to be used to assign costs to customers, should the order acceptance and order processing functions be considered one activity or two? Explain your reasoning 3.5 b) Calculate the cost per unit of east driver for each activity pool 8.5 c) Calculate the gross profit and overall profitability of Gillespie's and of Claridge, separately. Which customer is the more desirable customer for Oing Oing! 2 d) Provide one reasonable suggestion to management to make the less desirable of the two customers more profitable Explain how this can be presented to the customer in a way that will reduce the probability the customer will change to another supplier Question A (to replace question 4 on midterm) Qing Qing Enterprises Ltd. is a wholesaler that provides a variety of products to retailers in Manitoba and Saskatchewan. New owners purchased Qing Qing, and are unhappy with the internal reports available to them. One concern is that there is no process in place to evaluate the profitability of individual customers. The following information has been gathered: a) When an order is received from a customer, the credit status of the customer must be checked before the order is accepted. Once accepted, the items ordered are entered into the system and the quantities ordered compared to the quantities on hand. A picking document is created for the warehouse staff, listing the quantity ordered or on hand, whichever is fewer. b) Warehouse staff then retrieves the inventory items from the warehouse and packages them on pallets for shipment. The pallets are then shipped to the customers using Qing Qing trucks. There are established routes, so that each location has inventory delivered once per week. Shipments in Manitoba are made Mondays, Wednesdays and Fridays, with Saskatchewan shipments occurring on Tuesdays and Thursdays. If the customer requires a shipment between normal shipping dates, it can normally be accommodated but requires the driver to extend the route on the shipping date nearest the customer, which lengthens the trip significantly. The cost is dependent upon the extra time taken to deliver to the customer who placed the rush order. c) Customer support is provided through salespeople; each customer has a specific salesperson assigned. Meetings with salespeople have been carried out online during Covid. Activity Total cost of activity Cost driver Order acceptance $27,000 of orders received Order entry $63,000 8 of different products Picking inventory $162,000 # of different products Packing for shipment $81.000 8 of pallets delivered Shipping costs $168,000 5 of kms driven Rush shipments $10,000 of hours to customer Salesperson support $300,000 of customers Total overhead costs 5811.000 Total volume of cost driver 6,000 180.000 180,000 9,000 150,000 200 240 Two customers have been selected for evaluation, and totals have been calculated for the year ended September 30, 2021. Gillespie's Ltd. purchased items with a selling price of $210,000 from Qing Qing. Qing Qing paid $130,000 to acquire these inventory items. Claridge Corp. purchased items with a selling price of $80,000 from Qing Qing. Qing Qing paid S42,000 for these items. The difference in gross profit earned from each customer is due to Gillespie's receiving a discount in selling price for purchasing more than $200,000 during the year. The following information was gathered on the use of each cost driver by each customer. Cost driver activity Gillespie's Claridge # of orders received from Average # of different products purchased on EACH order Average # of pallets sent for EACH order 1 #ofkms driven to deliver EACH order Total time taken for delivery of rush orders in year 52 20 25 100 3 500 0 600 16 Required: 2 a) If activity-based costing is to be used to assign costs to customers, should the order acceptance and order processing functions be considered one activity or two? Explain your reasoning. 3.5 b) Calculate the cost per unit of cost driver for each activity pool. 8.5 c) Calculate the gross profit and overall profitability of Gillespie's and of Claridge, separately. Which customer is the more desirable customer for Qing Qing? 2 d) Provide one reasonable suggestion to management to make the less desirable of the two customers more profitable. Explain how this can be presented to the customer in a way that will reduce the probability the customer will change to another supplier