Fresno Fiber Optics, Inc. manufactures fiber optic cables for the computer and telecommunications
industries. At the request of the company vice president of marketing, the cost management staff has
recently completed a customer-profitability study. The following activity-based costing information was
the basis for the analysis.
Customer-Related Activities Cost Driver Base Cost Driver Rate
Sales activity …………………………………………….. Sales visits ………………………………..$1,000
Order taking …………………………………………….. Purchase orders …………………………..200
Special handling ……………………………………….. Units handled ………………………………..50
Special shipping ………………………………………… Shipments ……………………………………500
Cost-driver data for two of Fresno’s customers for the most recent year are
Customer-Related Activities Trace Telecom Caltex Computer
Sales activity ……………………………………………. 8 visits ……………………………………………….. 6 visits
Order taking ……………………………………………. 15 orders ……………………………………………… 20 orders
Special handling ………………………………………. 800 units handled …………………………………….. 600 units handled
Special shipping ……………………………………….. 18 shipments ………………………………………… 20 shipments
The following additional information has been compiled for Fresno Fiber Optics for two of its
customers, Trace Telecom and Caltex Computer, for the most recent year:
Trace Telecom Caltex Computer
Sales revenue ………………………………………….. $190,000 ………………………………………………. $123,800
Cost of goods sold ……………………………………. 80,000 ………………………………………………. 62,000
General selling costs …………………………………. 24,000 ………………………………………………. 18,000
General administrative costs ……………………….. 19,000 ………………………………………………. 16,000
Required:
1. Prepare a customer profitability analysis for Trace Telecom and Caltex Computer. ( Hint: Refer to
Exhibit 5–13 for guidance.)
2. Build a spreadsheet: Construct an Excel spreadsheet to solve requirement (1) above. Show how
the solution will change if the following information changes: Trace Telecom’s sales revenue was
$185,000 and Caltex Computer’s cost of goods sold was $59,000.
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