How can a company track the extent of price discounting on a customer-by- customer basis?
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Forber Bakery makes baked goods for grocery stores and has three divisions: bread, cake, and doughnuts. Each division is run and evaluated separately, but the main headquarters incurs costs that are indirect costs for the divisions. costs incurred in the main headquarters are as follows:The Forber upper management currently allocates this cost to the divisions equally. 0 ne of the division managers has done some research on activity-based costing and proposes the use of different allocation bases for the different indirect costs - number of employees for HR costs, total revenues for accounting department costs, square feet of space for rent and depreciation costs, and equal allocation among the divisions of "other" costs. Information about the three divisions follows:1. Allocate the indirect costs of Forber to each division equally. Calculate division operating income after allocation of headquarter costs. 2\. Allocate headquarter costs to the individual divisions using the proposed allocation bases. Calculate the division operating income after allocation. Comment on the allocation bases used to allocate headquarter costs. 3\. Which division manager do you think suggested this new allocation. Explain briefly. Which allocation do you think is "better?"
Why is customer-profitability analysis an important topic for managers?
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?
Emcee Inc. prepared the budget for 2017 assuming a \(20 \%\) market share based on total sales in the Midwest region of the United States. The total fruit drinks market was estimated to reach sales of 1.25 million cartons in the region. However, actual total sales volume in the western region was 1.5 million cartons. Calculate the market-share and market-size variances for Emcee Inc. in 2017 . (Calculate all variances in terms of contribution margin.) Comment on the results.c
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.
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