Creative Canopies (CC) is a manufacturer of flexible canopies for athletic facilities. CC has contracts with 3 universities to install and maintain the canopies on their baseball field bleachers. The fields are essentially identical, so CC management has assumed that all costs would be equal for each customer. However, after missing budget predictions this year, the CFO decided to use ABC costing principles to evaluate the profitability of their customers. The cost accounting team has put together the following estimates regarding specific cost activities related to maintenance of the canopies:
Support Activity Driver Cost per Driver Unit
Major refinishes: Hours on jobs $55
Minor touchups: Number of visits $400
Communication: Number of calls $25
The universities are all out-of-state but relatively equidistant from the manufacturing plant, so per-trip travel costs are not considered to be significantly different. However, each university has different expectations regarding maintenance of the canopy, and CC has collected the following data for each customer:
University Hours (major) Visits (minor Calls
USD 100 7 12
USC 90 5 15
UCLA 120 6 9
(Assume that each of the three customers produces gross profits of $10,000).
Which customer is the least profitable?
A. USD
B. UCLA
C. USC
Answers: 3
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Creative Canopies (CC) is a manufacturer of flexible canopies for athletic facilities. CC has contra...
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