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Abstract:
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What is missing from the familiar story is that there is no method of evaluating whether customer or customer segments are worthwhile. Increasing competition in plywood industry has increased interest to knowledge of customer and customer segment profitability. The main focus of this research id to explore and develop customer profitability analyses system to assign administration costs to customer with activity-based costing. The purpose is to develop suitable tool for monitoring customer profitability, which could be later implemented into the whole business area. Administration costs include among others marketing and product development costs. Differences between results of the existing customer profitability system and the developed ABC system are compared to find out if customers' cost structures are in contrast to each another or very similar in that area. The first part of the research was to familiarise oneself with the theoretical background of activity-based thinking, customer profitability, and process organisation. As the second part of the research, activity-based accounting system was planned and carried out as a five staged process. Activity analysis was conducted as an interview or questionnaire survey depending on a department. Finally customer profitability margin of selected pilot customer was calculated by assigning cost of customer-sustaining activities with chosen cost drivers to customers. Customer profitability results substantiate that relative differences between customer administration costs are bright. Especially to new customers administration cost proportion is bigger. To customers, who need special attention in production, cost of administration activities strikes to be higher. Difference of administration cost par customer is significant between ABC system and existing accounting system, which is based on prorated expenses. Gross margin accounting doesn't answer to present day information needs. Neither can't costs be directly divided to customers to get relevant data to direct strategic actions, and to stay competitive. Mills' fixed costs play a significant role in the overall cost structure. Also more accurate assigning of this cost should be considered to highlight customer cost differences in the future. /Kir10 |