Figure 18-1 The Bayview Corporation manufactures bottled water with an average manufacturing cost of $2 per case (a case contains 24 bottles).Bayview sold 1,000,000 cases last year to the following types of customers:
The supermarket chains order electronically through EDI which costs $25,000 annually.Bayview is responsible for shipping costs, which totaled $0.50 a case and special labels costing $0.02 per bottle.
The drugstore chains have special handling costs of $0.20 a case and increased administrative assistance costing $45,000 per year.
The gas station chains require special marketing promotions that cost $50,000.Sales commissions of 10% are paid.
Local pharmacies have special handling costs of $0.10 per case and sales commissions are paid to agents costing $0.25 per case.Bad debt expense averages 10% of sales.
-
Refer to Figure 18-1.What customer type is the most profitable ?

Question

Figure 18-1 The Bayview Corporation manufactures bottled water with an average manufacturing cost of $2 per case (a case contains 24 bottles).Bayview sold 1,000,000 cases last year to the following types of customers:
 The supermarket chains order electronically through EDI which costs $25,000 annually.Bayview is responsible for shipping costs, which totaled $0.50 a case and special labels costing $0.02 per bottle.
The drugstore chains have special handling costs of $0.20 a case and increased administrative assistance costing $45,000 per year.
The gas station chains require special marketing promotions that cost $50,000.Sales commissions of 10% are paid.
Local pharmacies have special handling costs of $0.10 per case and sales commissions are paid to agents costing $0.25 per case.Bad debt expense averages 10% of sales.
-
Refer to Figure 18-1.What customer type is the most profitable ?

Quizplus · Accepted Answer

The supermarket chains have no special handling costs, lower shipping costs, and do not require any special marketing promotions or administrative assistance. Additionally, they order electronically which saves on administrative costs. Therefore, they have the lowest costs associated with selling and are likely the most profitable customer type for Bayview Corporation.

Figure 18-1 the Bayview Corporation Manufactures Bottled Water with an Average