Clark Corporation Manufactures Cooling System Components $\text { Cost-driver data used by the firm and traceable to Engle and Midwest are. }$

question 52

Essay

Clark Corporation manufactures cooling system components. The company has gathered the following information about two of its customers: Engle Equipment and Midwest Refrigeration.
$\begin{array}{lcc}&\text { Engle }& \text { Midwest } \\&\underline {\text { Equipment }}& \underline {\text { Refrigeration }} \\\text { Sales revenue } & \$ 215,000 & \$ 154,000 \\\text { Cost of goods sold } & 95,000 & 68,000 \\\text { General selling costs } & 30,000 & 21,500 \\\text { General administrative costs } & 21,000 & 15,050\end{array}$

$\text { Cost-driver data used by the firm and traceable to Engle and Midwest are. }$


$\begin{array}{llc}\underline {\text { Customer } } & \underline { \text { Cost Driver } } & \underline { \text { Pool Rat } } \\\underline { \text { Activity }} \\\text { Sales activity } & \text { Sales visits } & \$ 900 \\\text { Order taking } & \text { Sales orders } & 250 \\\text { Special handling } & \text { Units handled } & 30 \\\text { Special shipping } & \text { Shipments } & 600\end{array}$ $\begin{array}{lll}\underline {\text { Customer } }&\text { Engle }& \text { Midwest } \\\underline { \text { Activity }}&\underline {\text { Equipment }}& \underline {\text { Refrigeration }} \\\text { Sales activity } & 8 \text { visits } & 5 \text { visits } \\\text { Order taking } & 17 \text { orders } & 22 \text { orders } \\\text { Special handling } & 600 \text { units } & 550 \text { units } \\\text { Special shipping } & 19 \text { shipments } & 30 \text { shipments }\end{array}$ Required:
A. Perform a customer profitability analysis for Clark. Compute the gross margin and operating income on transactions related to Engle Equipment and Midwest Refrigeration.
B. Compute gross margin as a percentage of sales revenue. Then compute (1) general selling and administrative costs as a percentage of gross margin and (2) total customer-related costs (i.e., costs that arise from sales visits, order taking, and special handling and shipping) as a percentage of gross margin.
C. On the basis of your calculations, which of the two customers is "more costly" to deal with? Briefly explain.

Evaluate the impact of changes in the number of buyers in the market.

Understand the distinction between movements along the demand or supply curve versus shifts in the curves.

Identify key historical figures and their contributions to the development of South and Southeast Asian art.

Recognize and locate significant archaeological sites related to the Indus Civilization, Hindu, and Buddhist cultures.

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Definitions:

Reconciling

The process of making one account or situation consistent with another, often involving the resolution of discrepancies.

Practice Records

Documentation kept by healthcare providers regarding the care and services provided to patients, often used for improving the quality of care.

Bank Statement

A bank statement is a summary of financial transactions that occurred over a given period on a bank account held by a person or business.

Third-Party Endorsement

A recommendation or approval of a product, service, or individual by an independent, external entity, often used in marketing to build trust.