Blue Ridge Case - Activity Based Costing (ABC)
Title: Blue Ridge Case - Activity Based Costing (ABC)
Category: Business & Economy / Accounting
Details: Words: 618 | Pages: 2.6 (approximately 235 words/page)
Blue Ridge Case - Activity Based Costing (ABC)
1) Profitability Analysis:
Blue Ridge Large Medium Small Total
Sales 8,762.00 3,744.00 8,024.00 0,530.00
Manufacturing Costs 2,552.70 ,164.09 2,864.09 7,580.88
Sales and Administration Costs ,303.47 ,790.54 6,805.99 5,900.00
Total Costs 0,856.16 2,954.63 9,670.08 3,480.88
Cost as % Sales 61.81% 66.92% 100.52% 78.16%
Profit 7,905.84 ,789.37 (,646.08) 7,049.12
Profit Margin 38.19% 33.08% -0.52% 21.84%
Note: For detailed calculations please reference attached document.
2) Define action steps for Blue Ridge based on the analysis:
The above customer profitability analysis indicates that the small customers have a negative profit margin. As this specific customer base accounts for 40% of Blue Ridges total sales volume we recommend the following action steps …
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showed last 75 words of 618 total…enable managers to determine if price discounting will encourage increased purchases while minimizing profit erosion.
In conclusion Blue Ridge defined the right activities; however they might want to consider conducting a product profitability analysis. This will enable them to manage the product mix more efficiently and identify future cost cutting in initiatives. In addition, we fell this would be another valuable exercise in determining weather or not going national would be profitable for Blue Ridge.
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