Exercise 8-16 Sweetwater Products has determined the following costs: Order processing (per order) Additional handling...
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Exercise 8-16 Sweetwater Products has determined the following costs: Order processing (per order) Additional handling costs if order marked rush (per order) 12 Customer service calls (per call) Relationship management costs (per customer per year) $3,800 $ 11 In addition to these costs, product costs amount to 88 percent of sales. In the prior year, Sweetwater had the following experience with one of its customers, Johnson Brands: Sales Number of orders Percent of orders marked rush Calls to customer service $50,300 280 70% 147 For the coming year, Sweetwater 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) Additional handling costs if order marked rush (per order) Customer service calls (per call) 13 $18 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). Profit (Loss) of Johnson Brands account
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