Question

	Johnson Beverage sell to Retail store customers - about 20 customers
	Last year Revenue was $12 million  - Sell Sport Drinks
	(Exhibit 1 Customer Profitability)
				Saver		Oscars				Downtown
				Superstore		Odd Lots		Midwellon		Retail		Others		Total JBI
	Net Revenue			$1,168,000		$1,192,000		$121,520		$454,500		$9,063,980		$12,000,000
	Cost of Goods Sold			1,048,000		1,048,000		104,800		393,000		7,886,200		10,480,000
	Gross Profit			120,000		144,000		16,720		61,500		1,177,780		1,520,000
	Customer Service Costs			116,800		119,200		12,152		45,450		906,398		1,200,000
	Customer Profit			3,200		24,800		4,568		16,050		271,382		320,000
	Profit %			0.3%		2.1%		3.8%		3.5%		3.0%		2.7%
	List price is  $15.20 per case   Cost is $13.10 per case
	Discounts vary by customer
	(Exhibit 2 Customer information)
				Saver		Oscars				Downtown
				Superstore		Odd Lots		Midwellon		Retail		Others		Total JBI
	Price per Case			$14.60		$14.90		$15.19		$15.15		$15.06		$15.00
	Number of Cases			80,000		80,000		8,000		30,000		602,000		800,000
	Number of Orders			16		40		20		30		394		500
	Number of Deliveries			110		400		200		230		3,540		4,480
	Miles per Delivery			5		19		11		4				10
	Expedited Deliveries			10		250		130		90		2,020		2,500
	Sales Visits			12		25		18		9		296		360
	Customer Saver Superstore is not happy - they think they
	are paying too much
								Customer Service Cost Detail
	In addition to COGS Johnson has Customer Service costs											Cost
	of $1.2 million per year - like overhead See Table 1							Product Handling				$672,000
	Currently allocated based on % of revenue							Taking Orders from Customers				100,000
								Delivering the Product				140,000
	They Run a report of Profitability by Customer							Expediting Deliveries				198,000
	See Exhibit 1							Sales visits				90,000
								Total				$1,200,000
	Can you help them using Activity Based costing?

Answer 1

Solution :