WDC Company has gathered the following data for two of its major customers - Tom Ltd
and Jerry Ltd:
Number of Orders: Tom 5; Jerry 30
Units per order: Tom 1000; Jerry 200
No. of Sales Return Orders: Tom 2 times; Jerry 5 times
No. of items returned: Tom 40 items; Jerry 175 items
No of sales calls to be made: Tom 12; Jerry 4
After using business analytics software to carefully analyse the operating data for the past
30 months, the firm has determined the following activity cost drivers and rates:
Sales Calls: Rs. 1000 per visit
Order Processing: Rs. 300 per order
Deliveries: Rs. 500 per order
Sales Returns: Rs. 100 per return order and Rs. 5 per unit returned
Sales Salary: Rs. 100000 per month
The contribution per unit (before accounting for customer attributable costs given by above
activities) from these customers is Rs. 50 per unit each. The produst is sold at Rs. 200 for
all customers.
Compare the profitability of the two customers. (b) -Activity-based management enables
better decision making-. Justify this statement using the example of the above caselet (5
Marks