1 order taking customer batch level product handling

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1. Order taking Customer batch-level Product handling Customer output-unit-level Delivery Customer batch-level Expedited delivery Customer batch-level Restocking Customer batch-level Visits to customers Customer sustaining-level Sales commissions Customer batch-level 2. Customer-level operating income based on expected cost of orders: Customers SR SRU NS SB SM WS Revenues $50 × 250; 550; 320; 130; 450; 1,200 $12,500 $27,500 $16,000 $6,500 $22,500 $60,000 Less: Returns $50 ×20; 35; 0; 0; 40; 60 1,000 1,750 0 0 2,000 3,000 Net Revenues $50 ×230; 515; 320; 130; 410; 1140 11,500 25,750 16,000 6,500 20,500 57,000 Cost of goods sold $35 × 230; 515; 320; 130; 410; 1,140 8,050 18,025 11,200 4,550 14,350 39,900 Gross margin 3,450 7,725 4,800 1,950 6,150 17,100 Customer-level operating costs: Order taking $30 ×6; 15; 8; 7; 20; 30 180 450 240 210 600 900 Product handling $2 × 250; 550; 320; 130; 450; 1,200 500 1,100 640 260 900 2,400 Delivery $0.50 × 420; 620; 470; 280; 806; 900 210 310 235 140 403 450 Expedited delivery $325 × 0; 6; 0; 0; 2; 5 0 1,950 0 0 650 1,625 Restocking $100 ×2; 1; 0; 0; 2; 6 200 100 0 0 200 600 Visits to customers 150 150 150 150 150 150 Sales commissions $25× 6; 15; 8; 7; 20; 30 150 375 200 175 500 750 Total customer-level operating costs 1,390 4,435 1,465 935 3,403 6,875 Customer-level operating income $ 2,060 $ 3,290 $ 3,335 $1,015 $ 2,747 $10,225
14-54 3. Customer level operating income based on actual order costs: Customer SR SRU NS SB SM WS Revenues $50 × 250; 550; 320; 130; 450; 1,200 $12,500 $27,500 $16,000 $6,500 $22,500 $60,000 Less: Returns $50 ×20; 35; 0; 0; 40; 60 1,000 1,750 0 0 2,000 3,000 Net Revenues $50 ×230; 515; 320; 130; 410; 1,140 11,500 25,750 16,000 6,500 20,500 57,000 Cost of good sold $35 × 230; 515; 320; 130; 410; 1,140 8,050 18,025 11,200 4,550 14,350 39,900 Gross margin 3,450 7,725 4,800 1,950 6,150 17,100 Customer-level operating costs: Order taking $14 × 6; $30 × 15; $14 × 8; $14 × 7; $14 × 20; $14 × 30 84 450 112 98 280 420 Product handling $2 × 250; 550; 320; 130; 450; 1,200 500 1,100 640 260 900 2,400 Delivery $0.50 × 420; 620; 470; 280; 806; 900 210 310 235 140 403 450 Expedited delivery $325 × 0; 6; 0; 0; 2; 5 0 1,950 0 0 650 1,625 Restocking $100 ×2; 1; 0; 0; 2; 6 200 100 0 0 200 600 Visits to customers 150 150 150 150 150 150 Sales commissions $25× 6; 15; 8; 7; 20; 30 150 375 200 175 500 750 Total customer-level operating costs 1,294 4,435 1,337 823 3,083 6,395 Customer-level operating income $ 2,156 $ 3,290 $ 3,463 $1,127 $ 3,067 $ 10,705 Comparing the answers in requirements 2 and 3, it appears that operating income is higher than expected, so the management of Snark Corporation would be very pleased with the performance of the salespeople for reducing order costs. Except for SRU, all of the customers are more profitable than originally reported.
14-55 4. Customer-level operating income based on actual orders and adjusted commissions Customer SR SRU NS SB SM WS Revenues $50 × 250; 550; 320; 130; 450; 1,200 $12,500 $27,500 $16,000 $6,500 $22,500 $60,000 Less: Returns $50 ×20; 35; 0; 0; 40; 60 1,000 1,750 0 0 2,000 3,000 Net Revenues $50 ×230; 515; 320; 130; 410; 1140 11,500 25,750 16,000 6,500 20,500 57,000 Cost of good sold $35 × 230; 515; 320; 130; 410; 1,140 8,050 18,025 11,200 4,550 14,350 39,900 Gross margin 3,450 7,725 4,800 1,950 6,150 17,100 Customer-level operating costs: Order taking $30 ×3; 15; 3; 4; 5; 15 90 450 90 120 150 450 Product handling $2 × 250; 550; 320; 130; 450; 1,200 500 1,100 640 260 900 2,400 Delivery $0.50 × 420; 620; 470; 280; 806; 900 210 310 235 140 403 450 Expedited delivery $325 × 0; 6; 0; 0; 2; 5 0 1,950 0 0 650 1,625 Restocking $100 ×2; 1; 0; 0; 2; 6 200 100 0 0 200 600 Visits to customers 150 150 150 150 150 150 Sales commissions $25× 3; 15; 3; 4; 5; 15 75 375 75 100 125 375 Total customer-level operating costs 1,225 4,435 1,190 770 2,578 6,050 Customer-level operating income $ 2,225 $ 3,290 $ 3,610 $1,180 $ 3,572 $11,050 5. The behavior of the salespeople is costing Snark Corporation $1,119 in profit (the difference between the incomes in requirements 3 and 4.) Although management thinks the salespeople are saving money based on the budgeted order costs, in reality they are costing

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