"A company should not allocate costs that are fixed in the short run to customers." Do you agree? Explain briefly.
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Bracelet Delights is a new company that manufactures custom jewelry. Bracelet Delights currently has six customers referenced by customer number: \(01,02,03,04,05,\) and 06 Besides the costs of making the jewelry, the company has the following activities:1. Customer orders. The salespeople, designers, and jewelry makers spend time with the customer. The cost-driver rate is 42dollars per hour spent with a customer. 2\. Customer fittings. Before the jewelry piece is completed, the customer may come in to make sure it looks right and fits properly. Cost-driver rate is 30 dollars per hour. 3\. Rush orders. Some customers want their jewelry quickly. The cost-driver rate is 90 dollars per rush order. 4\. Number of customer return visits. Customers may return jewelry up to 30 days after the pickup of the jewelry to have something refitted or repaired at no charge. The cost-driver rate is 40 dollars per return visit.Information about the six customers follows. Some customers purchased multiple items. The cost of the jewelry is \(60 \%\) of the selling price.1. Calculate the customer- level operating income for each customer. Rank the customers in order of most to least profitable and prepare a customer-profitability analysis, as in Exhibits \(14-3\) and \(14-4\) 2\. Are any customers unprofitable? What is causing this? What should Bracelet Delights do about these customers?
How can the sales-quantity variance be decomposed further?
Why is customer-profitability analysis an important topic for managers?
Miami Infonautics" senior vice president of marketing prepared his budget at the beginning of the third quarter assuming a \(25 \%\) market share based on total sales. Foolinstead Research estimated that the total handheld-organizer market would reach sales of 408,600 units worldwide in the third quarter. However, actual sales in the third quarter were 515,000 units.1. Calculate the market-share and market-size variances for Miami Infonautics in the third quarter of 2017 (calculate all variances in terms of contribution margins). 2\. Explain what happened based on the market-share and market-size variances. 3\. Calculate the actual market size, in units, that would have led to no market-size variance (again using budgeted contribution margin per unit). Use this market-size figure to calculate the actual market share that would have led to a zero market-share variance.
"Once a company allocates corporate costs to divisions, these costs should not be reallocated to the indirect-cost pools of the division." Do you agree? Explain.
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