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1.
Customer Project Engineering
Service Bidding Support
Activity cost
Activity base
serv. reqs. bids desgn. chngs.
Activity rate
/serv. req. /bid /change
2.
Number Activity
of Activities Rate = Total
Good Knowledge University
Customer service serv. reqs. /req.
Project bidding bids /bid
Engineering support desgn. chngs. /chng.
Total nonmanufacturing activity costs
Hot Shotz Arena
Customer service serv. reqs. /req.
Project bidding bids /bid
Engineering support desgn. chngs. /chng.
Total nonmanufacturing activity costs
Break-a-Leg Hospital
Customer service serv. reqs. /req.
Project bidding bids /bid
Engineering support desgn. chngs. /chng.
Total nonmanufacturing activity costs
3.
Good Hot Break-
Knowledge Shotz a-Leg
University Arena Hospital
Revenues
Less cost of goods sold
Gross profit
Less selling and administrative activities:
Customer service
Project bidding
Engineering support
Total selling and admin. activities
Income from operations
4.
Key Code:
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[Key essay answer here]
COLD ZONE MECHANICAL INC.
Customer Profitability Report
For the Year Ended December 31, 2015
0%
[Key code here]
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Section:
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1.
Customer Project
Engineering
Service Bidding Support
Activity cost
$85,800 $63,640 $91,500
2.
Number Activity
of Activities Rate = Total
Good Knowledge University
Customer service 50 serv. reqs. $325 /req. 16,250$
3.
Good Hot Break-
Knowledge Shotz a-Leg
University Arena Hospital
Revenues 1,206,500$ 762,000$ 317,500$
4.
Break-a-Leg Hospital is unprofitable, while the other two customers have acceptable margins. This is because Break-a-Leg Hospital requires
many customer service, project bidding, and design change activities. For example, Break-a-Leg Hospital awards contracts on only 12.5% of
the bid efforts (5 contracts/40 bids); it requests a large amount of service; and it requires extensive design change effort. The company’s
options include:
COLD ZONE MECHANICAL INC.
Customer Profitability Report
For the Year Ended December 31, 2015
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Score:
Instructions
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ON
Problem 26(11)-5A
Name:
Solution
Section: