Activities based on activity costing system

Assignment Help Finance Basics

Reference no: EM13826151

Problem:

Northern Distributors Plc. sells bottled water to corporate clients. The cost it pays for each bottle of water is £1.50. Its normal (list) selling price is £1.99 per bottle. Northern has decided to analyse the profitability of each of its five customers (101, 102, 103, 104 and 105). The following table details information about each of the five customers:

	101	102	103	104	105
Number of Bottles Sold	50,000	75,000	35,000	90,000	10,000
Price Discount	5%	10%	10%	5%	0%
Number of Orders	50	50	35	100	25
Number of Sales Visits	5	8	3	10	4
Number of Deliveries	25	30	35	50	25
Distance to Customer	10 km	5 km	30 km	15 km	10 km

Using an activity based costing system, Northern has adopted the following four activities and related cost per activity driver:

Order Taking (£60/order);
Sales Visit (£300/visit);
Delivery (£6/km);
Product Handling (£0.10 per unit).

Required:

Determine the profitability of each of the five customers.

Additional Information:

This question is from Accounting as well as it discusses about computation of four activities based on activity costing system.

Reference no: EM13826151

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