Reference no: EM132662879

Fresno Fiber Optics, Inc. manufactures fiber optic cables for the computer and telecommunications industries. At the request of the company vice president of marketing, the cost management staff has recently completed a customer-profitability study. The following activity-based costing information was the basis for the analysis.

Customer-Related            Activities Cost Driver Base              Cost Driver Rate
Sales activity .......................Sales visits ...........................................$1,000
Order taking ........................Purchase orders ................................200
Special handling ................Units handled ......................................50
Special shipping ................Shipments ............................................500

Cost-driver data for two of Fresno's customers for the most recent year are

Customer-Related Activities                         Trace Telecom                           Caltex Computer
Sales activity ....................................................8 visits............................ 6 visits
Order taking .....................................................15 orders ........................................20 orders
Special handling .............................................800 units handled ....................600 units handled
Special shipping .............................................18 shipments ...............................20 shipments

The following additional information has been compiled for Fresno Fiber Optics for two of its cus-tomers, Trace Telecom and Caltex Computer, for the most recent year:

                                      Trace Telecom                 Caltex Computer

Sales revenue .....................$190,000 ................$123,800
Cost of goods sold .............80,000 ..................62,000
General selling costs .........24,000 ..................18,000
General administrative costs 19,000 .............16,000

Required:

Problem 1. Customer profitability analysis for Trace Telecom and Caltex Computer. (Hint: Refer to Exhibit 5-13 for guidance.)

Problem 2. Build a spreadsheet: Construct an Excel spreadsheet to solve requirement (1) above. Show how the solution will change if the following information changes: Trace Telecom's sales revenue was $185,000 and Caltex Computer's cost of goods sold was $59,000.