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# Accounting Essay

844 words - 4 pages

ACCY 630 – Spring 2016
Individual Case
Case #5
Johnson Beverage Inc.
XIAO ZHANG

Assignment:
1. Use the information in case Exhibits 1 and 2 and other necessary data in the case on activities and costs to develop an activity-based cost system for JBI to use to determine customer profitability. Use this system to estimate customer profitability for Saver Superstore, Oscar’s OddLots, Midwellen Supermarket, and Downtown Retail.
* Product handling allocation rate:672,000/800,000=\$0.84/case
* Taking orders from customers allocation ...view middle of the document...

56/case
* Customer profit margin:\$144,000-\$125,000=\$19,000
* Customer profit:\$144,000-\$125,000=\$19,000
* Customer profit(% of net revenue)=\$19,000/\$1192000=1.6%
* Customer profit(%of total profit)=\$19,000/\$320,000=5.94%
*
* (3)Midwellen Supermarket customer service cost:
*
* 8,000*\$0.84+20*\$200+2200*\$3.125+130*\$79.2+18*\$250=\$32,391
* Service cost per case:\$32,391/8,000=\$4.05/case
* Customer profit:\$16,720-\$32,391=- \$15,671
* Customer profit(% of net revenue)=- \$15,671/\$121,510=- 13%
* Customer profit(%of total profit)=\$15,671/\$320,000=- 5%
*
*
* (4)Downtown retail customer service cost:
* 30,000*\$0.84+30*\$200+920*\$3.125+90*\$79.2+9*\$250=\$43,453
* Service cost per case:\$43,453/30,000=\$1.45/case
* Customer profit:\$61,500-\$43,453=- \$18,047
* Customer profit(% of net revenue)=- \$18,047/\$454,500=3.97%
* Customer profit(%of total profit)=\$18,047/\$320,000= 5.64%
*
*
*
*
* 2.Compare the estimated costs you calculate using an activity-based cost system to the estimated costs using the current system of allocating customer service costs. What causes the different costing methods to produce different results? Which costing system provides management of JBI with better information? Why?
*
* Using activity-based cost system
*
* | * saver super store | * Oscar’s oddlots | * Midwellen Supermarket | * Downtown retail |
* Service cost per case | * * 0.95 | * * 1.56 | * * 4.05 | * * 1.45 |
* Basic cost per case | * 13.1 | * 13.1 | * 13.1 | * 13.1 |
* Total cost per case | * 14.05 | * 14.66 | * 17.15 | * 14.55 |
* Selling price per case | * * 14.6 | * * 14.9 | * * 15.19 | * * 15.15 |
* Contribution margin per case | * * 0.55 | * * 0.24 | * * -1.96 | * * 0.6 |
* Figure 1
*
* | * Jim Thomas customer * Profit figures | * Revised customer profit figures | * Difference in customer profit figures |
* Saver superstore | * 3,200 | ...

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