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a) Compute revenue, costs, and profit margin for each customer. customer A customer B $ Revenue $ Variable costs Contribution margin Allocated costs - transactions Allocated costs customer support $ $ $$ $$ $$ $ Profit margin $ Enter negative numbers with a minus sign, i.e., a loss of $200 should be entered as -200, not as (200) or ($200). b) One of the customers is unprofitable. What can you do about this customer? (select all that apply) "fire" the customer increase the interest rate O you cannot do anything -- regardless of what you do, about 40-50% of your customers will be unprofitable. That is just the cost of doing business. O limit the number of free customer-support calls If you get rid of customer A, profit will: O decrease by $40 in the long term O decrease by $800 in the long term O remain the same in the long term X

a) Compute revenue, costs, and profit margin for each customer. customer A customer B $ Revenue $ Variable costs Contribution margin Allocated costs - transactions Allocated costs customer support $ $ $$ $$ $$ $ Profit margin $ Enter negative numbers with a minus sign, i.e., a loss of $200 should be entered as -200, not as (200) or ($200). b) One of the customers is unprofitable. What can you do about this customer? (select all that apply) "fire" the customer increase the interest rate O you cannot do anything -- regardless of what you do, about 40-50% of your customers will be unprofitable. That is just the cost of doing business. O limit the number of free customer-support calls If you get rid of customer A, profit will: O decrease by $40 in the long term O decrease by $800 in the long term O remain the same in the long term X

Quickbooks Online Accounting
Quickbooks Online Accounting
3rd Edition
ISBN:9780357391693
Author:Owen
Publisher:Owen
Chapter4: Operating Activities: Sales And Cash Receipts
Section: Chapter Questions
Problem 3.4C
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► YouTube W West Chester Uni.... L Question 3: Evaluating customer profitability. You own a credit card company. You want to evaluate the profitability of customers A and B. customer A customer B $2,000 $800 80 200 80 4 credit card balance number of transactions number of customer-support calls The only source of revenue from customers is the interest that you charge on credit card balances. You charge customers an interest rate of 40%. Thus, if the credit card balance is $1,000, reven $1000*0.4 $400. Variable costs are zero for simplicity. From your ABC system, the activity rates are $1 per transaction and $8 per customer-support call. a) Compute revenue, costs, and profit margin for each customer. customer A customer B Revenue Vintage Camera Variable costs Contribution margin Allocated costs - transactions Allocated costs - customer support $ $ $$ $$ $ $$ 774 If you get rid of customer A, profit will: O decrease by $40 in the long term O decrease by $800 in the long term O remain the same in the long term increase by $40 in the long term $ Profit margin $ Enter negative numbers with a minus sign, i.e., a loss of $200 should be entered as -200, not as (200) or ($200). Temple MIS Gis b) One of the customers is unprofitable. What can you do about this customer? (select all that apply) "fire" the customer increase the interest rate O you cannot do anything -- regardless of what you do, about 40-50% of your customers will be unprofitable. That is just the cost of doing business. O limit the number of free customer-support calls 6 NOV 10 A W X x CERCA
Transcribed Image Text:► YouTube W West Chester Uni.... L Question 3: Evaluating customer profitability. You own a credit card company. You want to evaluate the profitability of customers A and B. customer A customer B $2,000 $800 80 200 80 4 credit card balance number of transactions number of customer-support calls The only source of revenue from customers is the interest that you charge on credit card balances. You charge customers an interest rate of 40%. Thus, if the credit card balance is $1,000, reven $1000*0.4 $400. Variable costs are zero for simplicity. From your ABC system, the activity rates are $1 per transaction and $8 per customer-support call. a) Compute revenue, costs, and profit margin for each customer. customer A customer B Revenue Vintage Camera Variable costs Contribution margin Allocated costs - transactions Allocated costs - customer support $ $ $$ $$ $ $$ 774 If you get rid of customer A, profit will: O decrease by $40 in the long term O decrease by $800 in the long term O remain the same in the long term increase by $40 in the long term $ Profit margin $ Enter negative numbers with a minus sign, i.e., a loss of $200 should be entered as -200, not as (200) or ($200). Temple MIS Gis b) One of the customers is unprofitable. What can you do about this customer? (select all that apply) "fire" the customer increase the interest rate O you cannot do anything -- regardless of what you do, about 40-50% of your customers will be unprofitable. That is just the cost of doing business. O limit the number of free customer-support calls 6 NOV 10 A W X x CERCA
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