Delta Products has determined the following costs: Order processing (per order) $6...
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Accounting
Delta Products has determined the following costs:
Order processing (per order)
$6
Additional handling costs if order marked rush (per order)
$12
Customer service call (per call)
$12
Relationship management costs (per customer per year)
$3,530
In addition to these costs, product costs amount to 83 percent of sales. In the prior year, Delta had the following experience with one of its customers, Johnson Brands:
Sales
$54,400
Number of orders
260
percent of orders marked rush
70%
Calls to customer service
167
For the coming year, Delta Products has told Johnson Brands that it will be switched to an activity-based pricing system or it will be dropped as a customer. In addition to regular prices, Johnson will be required to pay:
Order processing (per order)
$7
Additional handling costs if order marked rush (per order)
$14
Customer service calls (per call)
$17
Calculate the profitability of the Johnson Brands account if activity is the same as in the prior year. (Enter loss using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)
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