1 . When we use the traditional allocation methods, we are spreading each of the costs more than each funnel equally. Were also allocating costs such as labeling and deprecation across channels which are not making use of the equipment. With the current method the three channels seem incredibly profitable. Retail- $12, 038, 356 or 18. five per cent
C- Store- $7, 415, 342 or 19%
Mass -$5, 029, 041 or 19. 3%
The changes that we would recommend to more accurately assess the expenditures are the following: I would allocate depreciation just to Mass because they are the only sector using the machine. I would spend Labeling only to Mass as they are the only sector using this. The other areas ship merchandise unlabeled. the order processing cost should be calculated by number of % orders accomplished by every sector Their packaging cost should be allocated in line with the % of total plans of total. Delivery also need to be given according to the part of number of packages sent through each channel. I would also suggest minimizing the 2 of products on hand kept in the warehouse into 30 days throughout all channels.
After making changes three channels are now generating:
Retail- 20, 701, 674 or 31. 85%
C-Store -4, 636, 773 or -11. 83%
Mass 9, 294, 003 or 35. 74%
2 . PROFITABILITY LEVEL:
thirty five. 75%
three or more. After putting into action the changes, that showed us the fact that C-store route was working at a loss. I then looked at each store singularly and determined the bills per retail store. This confirmed that there was 5 retailers which were generating the profitability of the channel straight down as they had been costing more compared to the profit produced from them. I would personally either prevent servicing all of them, increase the value when selling to these shops to offset the expense, or change the shipping conditions which might favor cost reduction. I really believe that providing the same standard of service to almost all its buyers is an incorrect strategy. To be able to offer this, Dream Beauty...