Omega printers ltd handles printing jobs joe patterson


Customer Profitability Analysis                                     

Omega Printers Ltd handles printing jobs. Joe Patterson, finds that serving some clients is more demanding than serving others. The demands made by some clients take up a lot of time that the sales staff would prefer to spend on soliciting new clients.  In particular, Joe is interested in knowing the profitability of serving Expert Travels - a travel operator and Evon Cosmetics - a retailer. The management accounting department staff of Omega printers have provided the following information.

 

Expert Travels

Evon Cosmetics

Sales revenue

$554,000

$446,800

Cost of goods sold

$288,000

$223,200

Selling costs

$86,400

$64,800

Administration costs

$68,400

$57,600

 

Cost driver data used by Omega Printers and traceable to the two clients are:

 

Customer-driven activities

Cost driver

Cost driver rate

Sales activity

Sales visits

$200 per visit

Order taking

Purchase orders

$ 40 per purchase order

Sorting & packaging

Number of packages

$ 50 per package

Ordinary shipping

Number of shipments

$ 150 per shipment

Special shipping

Number of shipments

$ 750 per shipment

The following data relates to those same two clients:

 

Customer-driven activities

Expert Travels

Evon Cosmetics

Sales activity

10 sales visits

20 sales visits

Order taking

15 purchase orders

36 purchase orders

Sorting & Packaging

200 packages

1,500 packages

Ordinary shipping

12 shipments

10 shipments

Special shipping

3 shipments

26 shipments

Required:

1.    Prepare a customer profitability analysis for Expert Travels and Evon Cosmetics.

2.    Comment on the relative profitability of the two customers by computing the gross margin, net profit margin and any other relevant ratios.

3.    Suggest and explain one non-financial performance measure that Omega Printers Ltd could use to evaluate each of the following:

a.    Customer acquisition

b.    Customer retention

c.    Customer satisfaction

Solution Preview :

Prepared by a verified Expert
Cost Accounting: Omega printers ltd handles printing jobs joe patterson
Reference No:- TGS0766356

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