Current Costing System Cost of warehousing/ Distribution Distribution Cost of inventory financing Cost of freight
20.5% of product cost 4.7% of product cost 7% of product cost Customer A
Annual Sales Cost of Product Cost of warehousing/ Distribution Cost of inventory financing Cost of freight Total Cost Gross Profit % Gross profit
$79,320.00 $50,000.00 $10,250.00 $2,350.00 $3,500.00 $66,100.00 $13,220.00 16.67%
Customer B
$79,320.00 $50,000.00 $10,250.00 $2,350.00 $3,500.00 $66,100.00 $13,220.00 16.67%
Data Total inventories (Catons) Total Requisitions No of lines per requisition Cost of capital "Pick-pack" activity
Activity Storage Recquisition Handling Basic WareHouse Stock Selection "Pick-Pack" Activity Data Entry Desktop Delivery Total
350000 310000 2.5 13% 90% of lines
Total Cost/expense $1,550,000.00 $1,801,000.00 $761,000.00 $734,000.00 $612,000.00 $250,000.00 $5,708,000.00
Quantiy of cost-a
350000 310000 775000 697500 775000 8500
Customer A
Activity Storage Recquisition Handling Basic WareHouse Stock Selection "Pick-Pack" Activity Data Entry Desktop Delivery Sub-Total Distribution Freight Cost of Capital- 13% of Inventory Balance Total
Cost- per allocation base
$4.43 per carton $5.81 per recquisition $0.98 per line $1.05 per line $0.79 per line $29.41 per desktop delivery
llocation base
Cost- per allocation base
cartons recquisitions lines lines lines desktop reqsuests
$4.43 per carton $5.81 per recquisition $0.98 per line $1.05 per line $0.79 per line $29.41 per desktop delivery
Customer B Units of allocations Total Cost base 350 $1,550.00 364 $2,114.72 910 $893.56 910 $957.62 910 $718.61 0 $0.00 $6,234.51 2250 1950
$10,434.51
Units of allocations Total Cost base 700 $3,100.00 790 $4,589.65 2500 $2,454.84 2500 $2,630.82 2500 $1,974.19 26 $764.71 $15,514.21 7500 6500
$29,514.21
Profitability Sales Product Cost ABC Profit % return on sales
Customer A $79,320.00 50000 $10,434.51 $18,885.49 23.81%
Customer B $79,320.00 50000 $29,514.21 -$194.21 -0.24%
