1. Caltex computer, operating income: $14,000
FiberCom, Inc. manufactures fiber optic cables for the computer and telecommunications industries. At the request of the company vice president of marketing, the cost management staff has recently completed a customer-profitability study. The following activity-based costing information was the basis for the analysis.
Customer-Related Activities Cost Driver Base Cost Driver Rate
Sales activity Sales visits $2,000
Order taking Purchase orders 400
Special handling Units handled 100
Special shipping Shipments 1,000
Cost-driver data for two of FiberCom's customers for the most recent year are:
Customer-Related Activities Caltex Computer Trace Telecom
Sales activity 8 visits 6 visits
Order taking 15 orders 20 orders
Special handling 800 units handled 600 units handled
Special shipping 18 shipments 20 shipments
The following additional information has been compiled for FiberCom for two of its customers, Caltex Computer and Trace Telecom, for the most recent year:
Caltex Computer Trace Telecom
Sales revenue $380,000 $247,600
Cost of goods sold 160,000 124,000
General selling costs 48,000 36,000
General administrative costs 38,000 32,000
1. Prepare a customer-profitability analysis for Caltex Computer and Trace Telecom. (Hint: Refer to Exhibit 5.13 for guidance.)
Customer-Profitability Analysis for Five Designated Customers: Patio Grill Company
2. Build a spreadsheet: Construct an Excel spreadsheet to solve requirement (1) above. Show how the solution will change if the following information changes: Trace Telecom's sales revenue was $250,000 and Caltex Computer's cost of goods sold was $155,000.
The solution examines customer-profitability analysis for five designated customers for Caltex Computers and Trace Telecom.