costacctg13_sm_ch05

Managers should determinewhetherthematerialcostscan

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: y­based analysis o f costs highlights how the Mom­and­Pop Single Stores use a larger amount of Pharmacare’s resources per revenue do llar than do the other two markets. The ratio o f the operating costs to revenues across the three markets is: General Supermarket Chains Drugstore Chains Mom­and­Pop Single Stores 1.59% 2.27% 8.61% ($58,997 ÷ $3,708,000) ($71,510 ÷ $3,150,000) ($170,573 ÷ $1,980,000) This is a classic illustration of the maxim that “all revenue dollars are not created equal.” The analys is indicates that the Mom­and­Pop Single Stores are the least profitable market. Pharmacare should work to increase profits in this market through: (1) a possible surcharge, (2) decreasing the number of orders, (3) offering discounts for quant ity purchases, etc. Other issues for Pharmacare to consider include a. Choosing the appropriate cost drivers for each area. The problem gives a cost driver for each chosen act ivit y area. However, it is likely that over time further refinements in cost drivers would occur. For example, not all store deliveries are equally easy to make, depending on par...
View Full Document

This note was uploaded on 10/11/2010 for the course ACCT 321 taught by Professor Cole during the Spring '10 term at University of Miami.

Ask a homework question - tutors are online