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Allocated fixed manufacturing overhead
65.68
65.68
65.68
Research and development costs specific to SR460
12.40
Marketing costs
11.90
Sales commissions
22.80
Allocated administrative costs of production depart.
10.76
10.76
Allocated administrative costs of corporate
headquarters
37.20
Customer service costs
6.10
Distribution costs
17.60
Total
$291.66
$172.90
$107.22
$183.66
14-28 (25 min.) Customer-profitability.
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:
Required:
1. Customer orders. The salespeople, designers, and jewelry makers spend time with the
customer. The cost driver rate is $42 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 per hour.
3. Rush orders. Some customers want their jewelry quickly. The cost driver rate is $90 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
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.
Required:
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.
