What is the financial consequence of rework? What should Colorscope do about both in-house and customer-driven rework?ĥ. Is full cost the right metricįor job profitability and customer profitability? What assumptions are we making about the variability of overhead costs when we do a “full-cost” analysis?Ĥ. This is in contrast to a “direct-cost” analysis that ignores overhead costs. What you have done above is a “full-cost” analysis. (b) What is the profitability of customer number 16 for Colorscope?ģ. It might be useful to diagram this system before you start calculating the cost Calculate profitability of jobĦ1001 by allocating cost to that job using the cost driver rates that you estimated. Then choose cost drivers to allocate the cost in various cost pools to jobs. You will have to choose resource drivers to allocate the cost of (a) Set up a two stage cost system to figure out the profitability of different jobs. Why would any customer, let alone large advertising agencies and department stores, go to Colorscope rather than go to the large printers listed in Exhibit 3?Ģ.
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