girl321
May 5, 2012, 06:09 PM
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
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