Prepare a customer profitability analysis for expert travels

Assignment Help Financial Accounting

Reference no: EM13177614

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

Reference no: EM13177614

Questions Cloud

Which model seems more realistic : Using the graphs from part 3 compare the profits of each company and evaluate their claims. Which model seems more realistic, the linear or radical model, and why?

Calculate the price and mix variance for each material : Calculate the price and mix variance for each material used, calculate the total material yield and total material usage variance.

What must have been its annual rate of economic growth : assume that the combined consumer goods + capital goods values for points a, b, and c are $20 billion, $40 billion, and $38 billion respectively. If the economy moves from point a to point b over a 14-year period, what must have been its annual ra..

What dimensions will give him the maximum area in the garden : alan is building a garden shaped like a rectangle with a semicircle attached to one short side. if he has 60 feet of fencing to go around it, what dimensions will give him the maximum area in the garden?

Prepare a customer profitability analysis for expert travels : Prepare a customer profitability analysis for Expert Travels and Evon Cosmetics and comment on the relative profitability of the two customers by computing the gross margin, net profit margin and any other relevant ratios.

What is the marginal cost of producing : What is the cost of producing q output in the short-run? d. What is the marginal cost of producing a 301s unit? A 401st unit? If you are comfortable doing so, you may answer this question by writing down the marginal cost function directly, rather..

What is her maximum possible monthly withdrawal : if her account earns 4% interest, compounded monthly, then when she retires, what is her maximum possible monthly withdrawal (without running out of money)?

What is the rate of return : Assume at the begining of the year you purchase an investment for 5,900 that pays 80 annual income. Also assume the investments value has increased to 6,500 by the end of the year.

What is the effect of continuing the contributions : How much will be in the account when the individual retires at the age of 65 if the contributions start when the person is 45 years old?

User Account

All Pages