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    girl321's Avatar
    girl321 Posts: 1, Reputation: 1
    New Member
     
    #1

    May 5, 2012, 06:09 PM
    Calculate net profit using ABC
    Sharma plc makes one standard product for which it charges the same basic price of $20 a unit, though discounts are allowed to certain customers. The business is in the process of carrying out a profitability analysis of all of its customers during the financial year just ended.

    Information about Lopez Limited, one of Sharma’s customers, is as follows:

    Discount on sales price 5%
    Number of products sold 40,000 units
    Manufacturing cost $12
    Number of sales orders 22
    Number of deliveries 22
    Distance travelled to deliver 120 kilometres
    Number of sales visits from Sharma’s staff 30

    Sharma uses an activity-based approach to ascribing costs to customers as follows:
    Cost pool Cost driver Rate

    Order handling Number of orders $75/ order
    Delivery costs Kilometres travelled $1.50 a kilometre
    Customer sales visits Number of visits $230 a visit

    Lopez usually takes two months credit, of which the cost to Sharma is estimated at 2 per cent per month.

    Required

    Calculate the net profit that Sharma plc derived from sales to Lopez Ltd during last year
    paraclete's Avatar
    paraclete Posts: 2,706, Reputation: 173
    Ultra Member
     
    #2

    May 7, 2012, 05:35 PM
    Quote Originally Posted by girl321 View Post
    Sharma plc makes one standard product for which it charges the same basic price of $20 a unit, though discounts are allowed to certain customers. The business is in the process of carrying out a profitability analysis of all of its customers during the financial year just ended.

    Information about Lopez Limited, one of Sharma’s customers, is as follows:

    Discount on sales price 5%
    Number of products sold 40,000 units
    Manufacturing cost $12
    Number of sales orders 22
    Number of deliveries 22
    Distance travelled to deliver 120 kilometres
    Number of sales visits from Sharma’s staff 30

    Sharma uses an activity-based approach to ascribing costs to customers as follows:
    Cost pool Cost driver Rate

    Order handling Number of orders $75/ order
    Delivery costs Kilometres travelled $1.50 a kilometre
    Customer sales visits Number of visits $230 a visit

    Lopez usually takes two months credit, of which the cost to Sharma is estimated at 2 per cent per month.

    Required

    Calculate the net profit that Sharma plc derived from sales to Lopez Ltd during last year
    Lets see your calculations

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