2. What type of cost system does Blue Ridge use, and is it consistent with their strategy?
System pembiayaan ABC konsisten digunakan dengan strategi cost leadership. Hal Ini juga akan membantu
perusahaan dalam mengidentifikasi pelanggan yang paling menguntungkan, dimana perusahaan ini bergerak
untuk strategi diferensiasi yang didasarkan pada kualitas dan inovasi.
3. Develop a spreadsheet analysis, which can be used to assess the profitability of the three customer groups of
Blue Ridge -- large, medium and small customer account size. Use the information in Tables 1-4 to trace and
allocate the costs necessary for the analysis.
The solution is shown on the attached spreadsheet. The solution process involves three stages:
Stage 1: Alokasikan SG & A Costs (Selling, General & Administrative)
1. Collect all SG & A costs incurred in each function (Shipping, Sales, Marketing) as showed in Table 4A
of the case.
2. For each function, collect usage % for each activity (Entering P.O., Commissions, Shipping, Invoicing,
Making Sales Calls, Checking Credit, Samples & Catalog Information, Special Handling, Distribution
Management, Marketing by Customer Type, Advertising & Promotion, Marketing, Administrative
Office Support, and Licenses & Fees) as shown in 4A.
3. Then, allocate function costs to activities by usage %.
Stage 2: Allocate activity costs to Customer Type (Large, Medium, Small).
1. Identify cost drivers (as shown in Table 4) and their consumption statistics for each customer type (as
shown in Table 1).
2. Calculate cost driver consumption % for each customer type.
3. Allocate activity costs to customer type.
Stage 3: Customer Profitability Analysis.
1. Calculate revenues for each customer group (sales quantities from Table 1 and unit prices from Table
2).
2. Calculate manufacturing cost (Regular, Mid-size, Hand, Special), customizing cost (Inking,
Embroidery, Dyeing), SG & A cost and total costs for each customer group (using data from Tables 1
& 2).
3. Calculate customer profits ($102,661, $49,742, -$4,828) and profit per customer ($12,833, $323, -$6)
for each customer type.
Note that the analysis makes it clear the group of large customers provide most of the profits for Blue
Ridge. Show how the cost of purchase orders, shipping, the medium and small customer groups predominantly
cause credit checks, advertising, and marketing. The analysis shows clearly that these two groups, on a per
customer basis, are marginally profitable. This analysis indicates that Blue Ridge should concentrate on its largest
customers and/or determines how to make its smaller customers more profitable. This is especially important if the
firm is planning to go national and this may bring in an even larger portion of medium and smaller customers.
Second: SG&A
ACTIVITIES
Enter P.O.
Commissions
Shipping
Invoicing
Sales Calls
Check Credit
Samples...
Sp Handling
Distribution
Marketing, Customer
Advertising
Marketing
Administrative
Licenses, fees
TOTAL
Shipping
17,000
15,500
$32,500
Shipping
Sales
37,400
117,800
$155,200
Marketing
20,400
9,300
$29,700
Percentage of...
Sales
Marketing
55%
10%
15%
20%
10%
10%
30%
10%
5%
10%
5%
30%
50%
15%
0%
100%
100%
Sales
100%
Marketing
85,360
15,520
0
0
46,560
0
0
0
0
7,760
0
0
0
0
$155,200
0
0
0
0
0
0
2,970
0
2,970
0
8,910
14,850
0
0
$29,700
Source
130,900Table 3
155,000Table 3
$285,900
Other
10%
65%
5%
5%
10%
Other
56,100
12,400
$68,500
Total
Assigned
5%
20%
5%
100%
Other
6,850
0
10,275
13,700
6,850
6,850
0
3,425
0
0
0
3,425
13,700
3,425
$68,500
Table 3
"
"
"
"
"
"
"
"
"
"
"
"
"
"
Total
Assigned
92,210
15,520
31,400
13,700
53,410
6,850
4,595
5,050
6,220
7,760
8,910
23,150
13,700
3,425
$285,900Table 3
Second Stage Allocation: Allocates SA&A Activities to Customer Type (Large, Medium, Small)
First: Identify Cost Driver and Its Consumption Level or Amount
Customer Type...
COST DRIVER
Large
Medium
Small
Units sold- w/o specials
99,770
55,118 116,812
Units sold-Total
100,250
58,544 117,406
Units embroidered
5,959
6,490
29,394
Units dyed
20,536
9,935
12,328
Orders
133
845
5,130
Shipments
147
923
5,431
Invoices
112
754
4,737
%>60days
1
11
122
Revenues (Sales
$308,762
$183,744 $318,024
Value)
Customers
8
154
824
Second: Calculate Cost Driver Percentage for Each Customer Type
Units sold (excl. Special)
0.367
0.203
Orders
0.022
0.138
Shipments
0.023
0.142
Invoices
0.020
0.135
%>60days
0.007
0.082
Revenues
0.381
0.227
Customers
0.008
0.156
0.430
0.840
0.835
0.845
0.910
0.392
0.836
Total
271,700
276,200 Table 1
41,843 "
42,799 "
6,108 "
6,501 "
5,603 "
134 "
$810,530 "
986 "
1.000From above
1.000From above
1.000From above
1.000From above
1.000From above
1.000From above
1.000From above
Cost Driver/ Allocation Base
(Table 4)
Orders
Revenues (Medium Customers
only)
Shipments
Invoices
Revenues (Large
Customers only)
%>60days
Revenues
Estimate (20% M, 80% S)
Revenues
Revenues
Estimate (25% M, 75% S)
Units sold (Excluding Specials)
Units sold (Excluding Specials)
Revenues (Medium Customers
only)
AA
Price
$
$
$
$
3.60
3.20
2.55
4.00
Small
10,550
10,308
95,954
594
117,406
54,400 Table 1
65,500 "
151,800 "
4,500 "
276,200
Large
Medium
Small
98,100
59,760
37,980
117,248
59,366
32,986
91,494
50,913 244,683
1,920
13,704
2,376
$308,762
$183,744 $318,024
195,840 Table 2
209,600 "
387,090 "
18,000 "
$810,530BB
$
$
1.2770
0.1100
Medium
16,600
18,552
19,966
3,426
58,544
19,754
12,554
19,109
10,617
17,770
85,399
4,933
855
$61,566 $109,426
16,381
9,566
19,184
7,610
2,259
$26,249
8,288
1,093
$18,947
37,536
1,356
$58,076
$102,791
$26,249
77,060
$206,101
$61,566 $109,426
$18,947 $58,076
53,490 155,350
$134,002 $322,853
64,736Table 2 x Table 1
67,465 "
135,102 "
6,480 "
$273,783CC
45,131Table 2 x Table 1
53,434
4,708
$103,272DD
$273,783From CC above
$103,272From DD above
$285,900From AA above
$662,955EE
$102,661
$12,833
$49,742
$323
$(4,828)
$(6)
$147,575BB-EE
$150