Customer Profitability Analysis Spring Company Collected the Following Data Pertaining

question 119

Essay

Customer Profitability Analysis Spring Company collected the following data pertaining to its activities with selected customers.
Spring Company mails monthly statements on or before the first day of each month.HS pays all of its account payables within the payment discount periods.Adventix does not take the early payment discounts.In fact, the company pays half of its accounts on the date that these accounts are due and pays the remainder at the end of the following month.Baldwin also does not take advantage of discounts for early payments.However, it pays its accounts on the specified due date.Cost of goods sold is sixty percent of gross sales price.Joan Lieberman, the controller of Spring Company, has estimated that the cost of working capital is approximately 2 percent per month.
Lieberman also gathered the following cost data: $\begin{array}{ll}\hline \text { Activity } & \text { Cost Driver and Rate } \\\text { Order taking } & \$ 50 \text { per order } \\\text { Order processing } & \$ 75 \text { per order } \\\text { Delivery } & \$ 300 \text { per delivery } \\\text { Expedited orders } & \$ 500 \text { per order } \\\text { Restocking } & \$ 10 \text { per unit plus } \$ 200 \text { per return } \\\text { Sales visits } & \$ 800 \text { per visit } \\\hline\end{array}$ Required:
Prepare and interpret a customer profitability analysis for Spring Company.How does it help Spring Company become more competitive and profitable?

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Definitions:

True Scores

Theoretically, the actual value of a variable, devoid of any measurement error, representing an individual's true ability or trait level.

Error Scores

The difference between observed values and the values predicted by a model, reflecting the amount of inaccuracy or deviation.

Method

A systematic approach or procedure for achieving a particular objective or conducting research.

Standard Deviations

A measure of the amount of variation or dispersion in a set of values, indicating how much the values differ from the mean of the data.