# Bus512

Topics: Expense, Income statement, Profit Pages: 2 (517 words) Published: May 26, 2013
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-based...