(Solution) 14-19 Customer Profitability, Distribution. Best Drugs Is A Distributor Of Pharmaceutical Products. Its ABC System Has Five Activities: Activity Area... | Snapessays.com


(Solution) 14-19 Customer profitability, distribution. Best Drugs is a distributor of pharmaceutical products. Its ABC system has five activities: Activity Area...


Complete the following questions in word or excel. Will include attachment of questions in case it does not come out correctly  14-19 Customer profitability, distribution. Best Drugs is a distributor of pharmaceutical products. Its ABC system has five activities: Activity Area Cost Driver Rate in 2013 1. Order processing $42 per order 2. Line-item ordering $5 per line item 3. Store deliveries $47 per store delivery 4. Carton deliveries $4 per carton 5. Shelf-stocking $13 per stocking-hour Rick Flair, the controller of Best Drugs, wants to use this ABC system to examine individual customer profitability within each distribution market. He focuses first on the Ma and Pa single-store distribution market. Using only two customers helps highlight the insights available with the ABC approach. Data pertaining to these two customers in August 2013 are as follows: Ann Arbor Pharmacy San Diego Pharmacy Total orders 13 7 Average line items per order 11 19 Total store deliveries 5 7 Average cartons shipped per store delivery 21 18 Average hours of shelf-stocking per store delivery 0.5 0.75 Average revenue per delivery $2,600 $1,900 Average cost of goods sold per delivery $2,100 $1,700 Required         1. Use the ABC information to compute the operating income of each customer in August 2013. Comment on the results and what, if anything, Flair should do.                  2. Flair ranks the individual customers in the Ma and Pa single-store distribution market on the basis of monthly operating income. The cumulative operating income of the top 20% of customers is $58,120. Best Drugs reports operating losses of $23,670 for the bottom 40% of its customers. Make four recommendations that you think Best Drugs should consider in light of this new customer-profitability information. 15-7 Distinguish among the three methods of allocating the costs of support departments to operating departments.14-19

 

Customer proftability, distribution. Best Drugs is

 

a distributor oF pharmaceutical products. Its ABC system

 

has fve activities:

 

Activity Area

 

Cost Driver Rate in 2013

 

1. Order processing

 

$42 per order

 

2. Line-item ordering

 

$5 per line item

 

3. Store deliveries

 

$47 per store delivery

 

4. Carton deliveries

 

$4 per carton

 

5. ShelF-stocking

 

$13 per stocking-hour

 

Rick ±lair, the controller oF Best Drugs, wants to use this

 

ABC system to examine individual customer proftability

 

within each distribution market. He Focuses frst on the

 

Ma and Pa single-store distribution market. Using only two

 

customers helps highlight the insights available with the

 

ABC approach. Data pertaining to these two customers in

 

August 2013 are as Follows:

 

Ann Arbor

 

Pharmacy

 

San Diego

 

Pharmacy

 

Total orders

 

13

 

7

 

Average line items per order

 

11

 

19

 

Total store deliveries

 

5

 

7

 

Average cartons shipped per

 

store delivery

 

21

 

18

 

Average hours oF shelF-

 

stocking per store delivery

 

0.5

 

0.75

 

Average revenue per delivery

 

$2,600

 

$1,900

 

Average cost oF goods sold

 

per delivery

 

$2,100

 

$1,700

 

Required

 

²

 

1. Use the ABC inFormation to compute the operating

 

income oF each customer in August 2013. Comment on

 

the results and what, iF anything, ±lair should do.

 

2. ±lair ranks the individual customers in the Ma

 

and Pa single-store distribution market on the basis oF

 


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This question was answered on: May 23, 2022

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