Blue Vibrance Company sells a product used in many manufacturing processes. The sales activity involves three activity areas: $\begin{array}{ll}
\text { Activity Area } & \text { Cost Driver and Rate } \
\text { Order taking } & \$ 100 \text { per purchase order } \
\text { Sales visits } & \$ 50 \text { per visit } \
\text { Delivery vehicles } & \$ 1 \text { per delivery mile }
\end{array}$
$\text { The following customer information is given: }$
$\begin{array}{lrr}&\mathrm{AX} & \mathrm{BY} & \mathrm{DZ}\
\text { Units sold } & 100,000 & 80,000&60,000 \
\text { List price } & \$ 50 & \$ 50&\$50 \
\text { Actual sal es price } & \$ 45 & \$ 48 &\$50\
\text { Number of purchase orders } & 30 & 20 &10\
\text { Number of sales visits } & 6 & 5&3 \
\text { Number of delivery miles } & 100 & 80&60
\end{array}$
What is the profitability of customer BY?

Question

Quizplus · Accepted Answer

To calculate the profitability of customer BY, we first determine the revenue from sales, then subtract the costs associated with order taking, sales visits, and delivery vehicles.Revenue from sales for BY:- Units sold: 80,000- Actual sales price: $48- Revenue = 80,000 units * $48/unit = $3,840,000Costs for BY:- Order taking: 20 orders * $100/order = $2,000- Sales visits: 5 visits * $50/visit = $250- Delivery vehicles: 80 miles * $1/mile = $80- Total costs = $2,000 + $250 + $80 = $2,330Profitability for BY = Revenue - Costs= $3,840,000 - $2,330 = $3,837,670

Blue Vibrance Company Sells a Product Used in Many Manufacturing