Question Details

Customers making large contributions to the profitability 




THE FOLLOWING INFORMATION APPLIES TO QUESTIONS 1 THROUGH 3.
The Hassan Corporation has an Electric Mixer Division and an Electric Lamp Division. Of a $20,000,000 bond issuance, the Electric Mixer Division utilized $14,000,000 and the Electric Lamp Division utilized $6,000,000 for expansion. Interest costs on the bond totaled $1,500,000 for the year.

1.	What amount of interest costs should be allocated to the Electric Mixer Division?
	a.	$450,000
	b.	$1,050,000
	c.	$4,200,000
	d.	$14,000,000

	
2.	What amount of interest costs should be allocated to the Electric Lamp Division?
	a.	$450,000
	b.	$1,050,000
	c.	$4,200,000
	d.	$6,000,000

3.	The above interest costs would be considered a(n)
	a.	output unit-level cost.
	b.	facility-sustaining cost.
	c.	product-sustaining cost.
	d.	batch-level cost.

		

4.	Customers making large contributions to the profitability of the company should 
	a.	be treated the same as other customers since all customers are important.
	b.	receive a higher level of attention from the company than less profitable customers.
	c.	be charged higher prices for the same products than less profitable customers.
	d.	not be offered the volume-based price discounts offered to less profitable customers.

		

5.	Price discounts are influenced by
	a.	the volume of product purchased.
	b.	a desire to sell to a customer in an area with high-growth potential.
	c.	negotiating skills of the sales person.
	d.	all of the above.

		

6.	To improve customer profitability, companies should track
	a.	only the final invoice price of a sale.
	b.	the volume of the products purchased by each customer.
	c.	discounts taken by each customer. 
	d.	both (b) and (c).




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