Bus512
1. Identify expenses on the income statement that are sales fulfillment expenses and divide them into cost pools. a. Warehouse Expenses: * warehouse personnel expenses, warehouse expenses (excluding personnel) * order entry expenses b. Delivery Expenses: Freight, delivery truck expenses 2. Find the rate for each cost pool.
Activity cost pool | Cost | Activity processed | Average Rate | Warehouse Expense | $2,000,000 | 80,000 | $25.00 | Order Entry Expense | Manual Order | $800,000*20%=$160,000 | 16,000 | $10.00 | | Order Line | $800,000*75%=$600,000 | 150,000 | $4.00 | | EDI | $800,000*5%=$40,000 | 8,000 | $5.00 | Delivery Expense | Normal Delivery | $450,000$2,400,000*15/16 | 75,000 | $36.00 | | | Total $2,700,000 | | | | Desktop Delivery | $200,000$2,400,000*1/16 | 5,000 | $70.00 | | | Total $350,000 | | |
3. Given the use of each resource in the sales fulfillment cycle, determine the profitability of each customer.
| Company A | Company B | Activity cost pool | # of Activities Processed | Cost | # of Activities Processed | Cost | Warehouse Expense | 200 | $5,000 | 200 | $5,000 | Order Entry Expense | Manual Order | 6 | $60 | 100 | $100 | | Order Line | 60 | $240 | 180 | $720 | | EDI | 6 | $30 | 0 | 0 | Delivery Expense | Normal Delivery | 200 | $7,200 | 150 | $5,400 | | Desktop Delivery | 0 | 0 | 25 | $1,750 | Total Cost | $12,530 | $12,970 |
Profitability | Company A | Company B | | Current | ABC | Current | ABC | SalesCost of items purchased | $103,000$85,000 | $103,000$85,000 | $104,000$85,000 | $104,000$85,000 | Gross Margin Warehousing, Distribution and Order Entry | $18,000$12,750 | $18,000$12,530 | $20,000$12,750 | $20,000$12,970 | Contribution to general and selling expenses, and profit | $5,250 | $5,470 | $6,250 | $7,030 | | $220 | $780 |
4. What should Dakota do based on the information you determined?
Based on the results from using
Activity cost pool | Cost | Activity processed | Average Rate | Warehouse Expense | $2,000,000 | 80,000 | $25.00 | Order Entry Expense | Manual Order | $800,000*20%=$160,000 | 16,000 | $10.00 | | Order Line | $800,000*75%=$600,000 | 150,000 | $4.00 | | EDI | $800,000*5%=$40,000 | 8,000 | $5.00 | Delivery Expense | Normal Delivery | $450,000$2,400,000*15/16 | 75,000 | $36.00 | | | Total $2,700,000 | | | | Desktop Delivery | $200,000$2,400,000*1/16 | 5,000 | $70.00 | | | Total $350,000 | | |
3. Given the use of each resource in the sales fulfillment cycle, determine the profitability of each customer.
| Company A | Company B | Activity cost pool | # of Activities Processed | Cost | # of Activities Processed | Cost | Warehouse Expense | 200 | $5,000 | 200 | $5,000 | Order Entry Expense | Manual Order | 6 | $60 | 100 | $100 | | Order Line | 60 | $240 | 180 | $720 | | EDI | 6 | $30 | 0 | 0 | Delivery Expense | Normal Delivery | 200 | $7,200 | 150 | $5,400 | | Desktop Delivery | 0 | 0 | 25 | $1,750 | Total Cost | $12,530 | $12,970 |
Profitability | Company A | Company B | | Current | ABC | Current | ABC | SalesCost of items purchased | $103,000$85,000 | $103,000$85,000 | $104,000$85,000 | $104,000$85,000 | Gross Margin Warehousing, Distribution and Order Entry | $18,000$12,750 | $18,000$12,530 | $20,000$12,750 | $20,000$12,970 | Contribution to general and selling expenses, and profit | $5,250 | $5,470 | $6,250 | $7,030 | | $220 | $780 |
4. What should Dakota do based on the information you determined?
Based on the results from using