ACCT20001 Lecture Notes - Lecture 8: Resource Consumption, Profit Margin
5 Jun 2018
School
Department
Course
Professor
ACCT20001 Cost Management - Tutorial Week 9
2.
Bright Forever Flowers: Customer segment profitability including ABC analysis of S G & A costs
Retail Stores
Catalog and Internet
Floral Shops
Sales revenue
$25 000 000
$35 000 000
$30 000 000
Cost of goods sold
$12 000 000
$16 450 000
$15 000 000
Gross Margin
$13 000 000
$18 550 000
$15 000 000
Less S G & A costs:
Taking orders
$ 625 000
$1 500 000
$ 375 000
Handling customer
inquiries
$ 225 000
$ 900 000
$ 375 000
Processing invoices
$ 668 000
----
$1 336 000
Processing payments
$ 750 000
$ 600 000
$ 650 000
Maintenance of customer
database
$ 450 000
$1 800 000
$ 750 000
Develop and print catalogs
$1 280 000
$4 480 000
$2 240 000
Mail catalogs
$ 124 500
$1 162 000
$ 207 500
Making sales calls
$ 480 000
-------
$ 720 000
General overhead
$ 975 000
$1 365 000
$ 1 167 000
Total
$5 242 500
$11 338 000
$7 421 500
Profit/income before tax
$7 757 500
$7 212 000
$7 578 500
Profit margin %
31.03%
20.60%
25.26%
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Document Summary
Bright forever flowers: customer segment profitability including abc analysis of s g & a costs. State two (cid:272)lear uses, i(cid:374)(cid:272)ludi(cid:374)g refere(cid:374)(cid:272)es to bff"s profita(cid:271)ility a(cid:374)alysis a(cid:374)d related information. Better assess the profitability (and extent of profitability) of each customer group through more reliable assignment of s g & a costs. For example, the abc analysis results in no assignment of activity costs to. Catalog and internet customers for invoices sent and sales calls. This has helped enhance the profitability of this customer segment. Under the previous assignment basis a portion of these activities and costs would have been assigned. Ide(cid:374)tify areas for a(cid:272)ti(cid:448)ity re(cid:448)ie(cid:449) o(cid:448)erall leadi(cid:374)g to a(cid:272)ti(cid:448)ity redu(cid:272)tio(cid:374) a(cid:374)d eli(cid:373)i(cid:374)atio(cid:374) for (cid:374)o(cid:374)-value- added activities. Identify areas for exploring activity improvements with customers and achieve resource consumption reduction in the short-term with a view to cost reduction in the longer term.
