Nerrod Company sells its products at $840 per unit, net 30. The firm's gross margin ratio is 40 percent. The firm has estimated the following operating costs: Activity Cost Driver and Rate Sales calls $ 570 per visit Order processing $ 185 per order Deliveries $
Nerrod Company sells its products at $840 per unit, net 30. The firm's gross margin ratio is 40 percent. The firm has estimated the following operating costs:
| Activity | Cost Driver and Rate | ||
| Sales calls | $ | 570 | per visit |
| Order processing | $ | 185 | per order |
| Deliveries | $ | 80 | per order + $0.50 per mile |
| Sales returns | $ | 95 | per return and $6.4 restocking per unit returned |
Nerrod Company has gathered the following data pertaining to activities it performed for two of its customers:
| XBT | NINTO | |||
| Number of orders | 27 | 2 | ||
| Number of parts per order | 670 | 2,170 | ||
| Sales returns: | ||||
| Number of returns | 4 | 10 | ||
| Number of units returned | 40 | 50 | ||
| Number of sales calls | 14 | 10 | ||
| Miles per delivery | 10 | 20 | ||
| Shipping terms | FOB, Factory | FOB, Destination | ||
What is Nerrod's total customer unit-level cost applicable to XBT as a customer?
Operating costs are associated with a company's day-to-day operation and management. Rent, labor, and other overhead costs, as well as raw materials and maintenance costs, are examples of direct costs of goods sold (COGS) and other operating expenses, often known as selling, general, and administrative (SG&A) costs. Non-operating finance charges, such as interest, investments, or foreign currency translation, are not included in operating costs. Businesses must keep track of both operating expenses and non-operating costs, such as loan interest.
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