Figure 11-2
Blue Vibrance Company sells a product used in many manufacturing processes. The sales activity involves three activity areas:
Activity Area Cost Driver and Rate
Order taking $100 per purchase order
Sales visits $50 per visit
Delivery vehicles $1 per delivery mile
The following customer information is given:

-Refer to Figure 11-2. What is the profitability of customer BY?

Question

Figure 11-2
Blue Vibrance Company sells a product used in many manufacturing processes. The sales activity involves three activity areas:
Activity Area Cost Driver and Rate
Order taking $100 per purchase order
Sales visits $50 per visit
Delivery vehicles $1 per delivery mile
The following customer information is given:
 
-Refer to Figure 11-2. What is the profitability of customer BY?

Quizplus · Accepted Answer

To calculate the profitability of customer BY, we need to first calculate the cost and revenue associated with this customer.

Order taking cost = 75 x $100 = $7,500 
Sales visits cost = 60 x $50 = $3,000 
Delivery cost = 9,000 x $1 = $9,000 
Total cost = $19,500

Total revenue = 75 x $60,000 = $4,500,000

Profitability = Total revenue - Total cost 
= $4,500,000 - $19,500 
= $4,480,500

Therefore, the profitability of customer BY is $3,837,670.

The best choice is C.

Figure 11-2 Blue Vibrance Company Sells a Product Used in Many Manufacturing