Purchase Solution

Century Linen customer support and distribution costs, contribution margin

Not what you're looking for?

Ask Custom Question

See attached file for data.

Customer support & distribution costs are pretty high at Century Linen. The total amount was $180,000 last year. The marketing manager has recently been to a seminar and learned about applying ABC to analyze customer and distribution costs. He suggests that the company analyze overhead costs associated with supporting different types of customers before proceeding with an expansion. The marketing manager knows that the small shops require a lot of attention and is somewhat dubious about the CEO's proposed strategy. The CEO accepts the suggestion and you are brought in as a consultant to prepare the analysis. The attached word document has a table that provides some information that may be pertinent for the analysis.

1. Calculate the customer support and distribution costs associated with the three types of customers.
* Use a simple strategy first and allocate the costs based on revenues.
* Recalculate the allocations using activity based costing (ABC).

2. Determine contribution margin less customer support and distribution costs for both approaches above.

3. Which type of customer should the company support and why? Refer to your analysis in your response.

Attachments
Purchase this Solution

Purchase this Solution


Free BrainMass Quizzes
Cost Concepts: Analyzing Costs in Managerial Accounting

This quiz gives students the opportunity to assess their knowledge of cost concepts used in managerial accounting such as opportunity costs, marginal costs, relevant costs and the benefits and relationships that derive from them.

Balance Sheet

The Fundamental Classified Balance Sheet. What to know to make it easy.

Operations Management

This quiz tests a student's knowledge about Operations Management

Situational Leadership

This quiz will help you better understand Situational Leadership and its theories.

Team Development Strategies

This quiz will assess your knowledge of team-building processes, learning styles, and leadership methods. Team development is essential to creating and maintaining high performing teams.