Cashunda Buckner-ACG3351-12-Week-3.docx

Cashunda Buckner-ACG3351-12-Week-3.docx - Cashunda Buckner...

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Cashunda Buckner Week 3 Assignment 14-19 1. The activity-based costing for each customer is: Ann Arbor Pharmacy San Diego Pharmacy 1. Order processing, $42 * 13; $42 * 7 $ 546.00 $ 294.00 2. Line-item ordering, $5 * (13 * 11; 7 * 19) 715.00 665.00 3. Store deliveries, $47 * 5; $47 * 7 235.00 329.00 4. Carton deliveries, $4 * (5 * 21; 7 * 18) 420.00 504.00 5. Shelf-stocking, $13 *(5 *0.5; 7 * 0.75) 32.50 68.25 Operating costs $1,948.50 $1,860.25 The operating income of each customer is: Ann Arbor Pharmacy San Diego Pharmacy Revenues, $2,600 * 5; $1,900 *7 $13,000.00 $13,300.00 Cost of goods sold, $2,100 *5; $1,700 * 7 10,500.00 11,900.00 Gross margin 2,500.00 1,400.00 Operating costs 1,948.50 1,860.25 Operating income $ 551.50 $ (460.25) San Diego Pharmacy has a lower gross margin percentage than does Ann Arbor [10.5% ($1,400 / $13,300) vs. 19.2% ($2,500 / $13,000)] and consumes more resources to obtain this lower margin. Ann Arbor is a profitable customer, while San Diego is not.
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2. a. Pay attention to the top 20% of the customers. b. Work out ways internally at Best Drugs to reduce the rate per cost driver and reduce the cost per order by having better order placement linkages with customers. c. Work with customers so that their behavior reduces the total costs. d. Offer salespeople bonuses based on the operating income of each customer rather than the gross margin of each customer. 14-25 1. Budget for 2014 1. 2. 3. 4. 5. 6. Selling Price V. Cost Per Unit C. Margin Per Unit Units sold Sales Mix C. margin Kola $10.00 - $5.50 = $4.50 500,000 40% $2,250,000 Limor 7.50 - 4.00 = 3.50 750,000 60 2,625,000 Total 1,250,000 100% $4,875,000 Actual for 2014 1. 2. 3. 4. 5. 6. Kola $10.10 - $5.75 = $4.35 504,300 41% $2,193,705 Limor 7.75 - 3.70 = 4.05 725,700 59 2,939,085 Total 1,230,000 100% $5,132,790 Sales-volume variance = Actual quantity of units sold - Budgeted quantity of units sold * C. margin per unit. Kola = (504,300 – 500,000) * $4.50 = $19,350 - Favorable Limor = (725,700 – 750,000) * $3.50 = 85,050 - Unfavorable Total $65,700 - Unfavorable
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Sales - quantity variance = Actual units sold - Budgeted units sold * B. sales -mix % * C. margin per unit. Kola = (1,230,000 – 1,250,000) × 0.40 × $4.50 = $36,000 – Unfavorable Limor = (1,230,000 – 1,250,000) × 0.60 × $3.50 = 42,000 – Unfavorable Total $ 78,000 - Unfavorable Sales-mix variance = Actual units sold * Actual sales-mix% - Budgeted sales-mix % * Budgeted contribution margin per unit Kola = 1,230,000 × (0.41 – 0.40) × $4.50 = $55,350 - Favorable Limor = 1,230,000 × (0.59 – 0.60) × $3.50 = 43,050 - Unfavorable Total $12,300 – Favorable 2.
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