3: Research Paper (Week 8) - Assignment Example

d firmly by the use of activity based costing, yes Buy 4 less is our leading loyal customer and mass merchandiser but what they are requesting will affect our level of revenue. Their request of additional cost to satisfy their need and reduce price per unit will do harm on our return level. No, they should not even take a second thought on it. This is because from the profitability analysis above they don’t add up anything on the margin of Happy chips, in fact, they are a loss. If the management considers to go ahead and implements their request it will suffer a loss due to additional costs which will not be paid back by Buy 4 less.

Yes, they should eliminate. Any business firm is out there to make a profit so is Happy chips. From the analysis, we can see that only two business segments are profiting Happy chips inc. i.e. drug and grocery segment, as for Buy 4 less it is adding loss to the firm and therefore the management of Happy chips ought to have eliminated it. Though there is a cost addition of $ 300,000 which is an investment that will serve Happy chips for a long period. From the analysis, we find that the profit will be $ 119,906.

8 which even surpasses that of Drug segment. It will take only 2.7 years to recoup the cost of installing automated order inquiry system. (300,000/119,906.8) = 2.68 years. Yes, there are, the number of units a customer purchase should be considered. We find that Happy chips inc. has three-segment but the segment has individual customers. For instance grocery has 250 retail customers who sum up the 2,100,000 units therefore each retail customer purchases 8,400 units, Drug segment has 140 retail customers who sum up a total of 365,000 units therefore each retail customer purchase 2,607 units while Buy 4 less a sole merchandise purchase the 400,000 (American Public University Systems, n.d.).

If the new price is effected by Happy chips inc. to Buy 4 less merchandise then he will be the profiting customer as compared to the