Question

Consider a product line whose products generate a 50% gross margin (after subtracting volume-related manufacturing and...

Consider a product line whose products generate a 50% gross margin (after subtracting volume-related manufacturing and administrative expenses from prices).

The cost for handling an individual customer order is SEK 750, and the extra cost to handle a production order for a non-stocked item is SEK 2,250.

  1. Compare the net operating profits of two orders, both for SEK 2,000. One order is for a stocked item and the other is for a non-stocked item.
  2. Compare the operating profits and profit margins of two customers, A and B. Both customers purchased SEK 160,000 worth of goods during the year. A’s sales came from three orders, for three different non-stocked items. B’s sales came from 28 orders, of which 6 were for stocked items, and 22 for non-stocked items.

Homework Answers

Answer #1

Compare the net operating profits of two orders, both for SEK 2,000. One order is for a stocked item and the other is for a non-stocked item.

shoked item = 2000*50%=1000-750= 250 SEK

non shoked item = 2000*50% =1000-2250= (1250) SEZ

b)

customer A Customer B
Customer purchased 160000 SEZ 160000 SEZ
50% profit margin 80000 SEZ 80000 SEZ
shocked order 6 6
Nonshoked order 3 22
Shoked rate 750
Non shoked rate 2250
shocked expenses 6*750 4500 4500
non shoked 3* 2250 6750 49500
profit 80000-6750 73250 30500
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