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Managing Customers and Time

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Submitted By wmhlas
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8/22/2011

ACCG301: Organisational Planning and Control

LECTURE 3

Managing Customers and Time
Chapters 10 (pp. 396-405) & 16 (pp. 646-651) Cost Accounting: a managerial emphasis (Horngren et al.)
Rahat Munir Department of Accounting and Corporate Governance accg301@mq.edu.au

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Learning Outcomes
1. Explain customer profitability analysis 2. Describe differences in an organisation’s revenues and costs across customers purchasing the same product 3. Explain differences in customer level costs across customers 4. Describe the ways to calculate customer costs 5. Describe customer-response time and explain the reasons for and costs of delays 6. Explain the customer waiting time

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8/22/2011

Customer Profitability Analysis

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Customer Profitability Analysis
Customer profitability analysis is a decision tool used to evaluate the profitability of a customer. Why calculate customer profitability? Which customers generate the greatest profits? And how do we retain them? Which customers generate the lowest profits? And how can we make them more profitable? What types of customers should we focus on to maximise profitability?

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How to Calculate Customer Profitability?
COMPARISON
Revenue generated by a customer or customer group – [customer revenue analysis] Costs of all activities used to support a dt t customer or customer group – [customer cost analysis]

Relative profitability of customers can be determined and used for a range of strategic decisions

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Customer Revenue Analysis
• Customer revenue analysis is used to evaluate whether net revenue from a customer meets an organisation’s profit objectives. bj ti

Customer Revenue = Customer Expenses + Target Profit
• Variables that explain revenue differences across customers:
– The number of units purchased – The magnitude of price discounting
• Price

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