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Unformatted text preview: with a copy of our
2009 annual report. Since you are an accounting expert, perhaps you could
advise us on ways in which we might improve our annual report to enhance the
information value for donors.
He then gave you the statement of operations and the balance sheet of CYS (see
Exhibit 1 on the following page). Page 2 of 7 Page 3 of 7 Additional Information:
Included in office expenses in the Operating Fund are outlays of $6,000 for two laptops and
a used photocopier. CYS charges capital expenditures to the current period.
CYS maintains one bank account into which it deposits donations for both CYS and the
As Mary Jones, comment on ways in which the reporting of CYS might be improved to
enhance the informational value for donors.
Question 2: Customer Profitability (15 marks) Alana’s Dresses Inc. is a new company that designs and manufactures custom dresses.
Alana’s Dresses currently has six customers that are identified by customer numbers A, B,
C, D, E, and F. Besides the costs of making the dresses, the company has the following
activities: Customer orders. The salespeople, designer, and dressmakers spend time with the
customer. The cost driver rate is $40 per hour of time spent with a customer.
Customer fittings. The customer will come for a custom fitting of their dress before the
final sewing takes place to ensure the proper fit. Cost driver rate is $25 per hour of
Rush orders. Some customers need their dresses quickly. Customers are charged a $25
fee for a rush order. The cost driver rate for a rush order is $100 per rush order.
Number of customer return visits. Customer may return the dresses up to 30 days after
picking up the dress to have it refitted or repaired at no extra charge. Normally a refit or
repair will take a seamstress 2 hours to complete. The cost driver rate is $30 per hour of
the seamstress’s time. Information about the six customers follows. Some customers purchased multiple items.
The cost of the dress is 70% of the selling price.
Customer A B C D E F Sales Revenue $600 $4200 $300 $2500 $4900 $700 Hours spent on customer order 2 7 1 5 20 3 Hours on fittings 1 2 0 0 4 1 Number of rush orders 0 0 1 1 3 0 Number of return visits 0 1 0 1 5 1 Required:
a. Calculate the customer-level operating income for each customer by preparing a
customer profitability analysis (similar to Exhibit 16-7 on page 808 of Reading 8 in your
textbook). Rank the customers according to profitability. (10 marks)
b. Are any customers unprofitable? What is causing this? What should Alana’s do with
respect to these customers? (5 marks) Page 4 of 7 Question 3: Sales Variances (15 marks) The Chair Company manufactures two modular types of chairs: one for the residential
(home) market and the other for the office market. Budgeted and actual operating data for
the year 2011 are:
Static Budget Actual Results Home Office Home Office Number of chairs sold 260,000 140,000 248,400 165,600 Contribution margin $26,000,000 $11,200,000 $22,356,000 $1...
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- Fall '13