Determine the profitability of the gamma co

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Reference no: EM132511106

CUSTOMER PROFITABILITY

Nimoy, Inc. is contemplating the use of a CPM system. They have estimated that their indirect customer servicing costs and cost drivers are as follows:

                                            Estimated                     Estimated

                                                           Annual                      Cost Driver

                                                               Cost Pool                  Costs Activity

Order processing                            $251,125                   122,500 orders

Order picking                                   $720,000                  80,000 line items

Shipping                                           $72,000                    20,000 lbs shipped

Processing returns                             $5,200                        650 items returned

In the current year, one of Nimoy's customers, Gamma Co., had the following activity:

Sales $74,000

Cost of goods sold $64,609

Number of orders placed 20

Number of line items per order 10

Pounds shipped 100

Number of items returned 20

Question 1: Determine the profitability of the Gamma Co.

a) Profitability in dollars?

b) Profitability as the percentage profit margin?

 

Reference no: EM132511106

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