Customer-cost hierarchy, customer protability. Louise Newman operates Interiors by Louise, an interior design consulting and window treatment fabrication business. Her business is made up of two different distribution channels, a consulting business in which Louise serves two architecture rms (Adams and Betz) and a commercial window treatment business in which Louise designs and constructs window treatments for three commercial clients (Chatham, Dedham, and Elm). Louise would like to evaluate the protability of her two architecture rm clients and three commercial window treatment clients, as well as evaluate the protability of each of the two channels and the business as a whole. Information about her most recent quarter follow: AdamsBetzChatham$357,380DedhamElmGross revenueCustomer-level costs$234,000$188,800117,200$147,840115,720$73,200147,000218,58057,040Overhead costs total $340,400. Louise has determined that 25% of her overhead costs relate directly to herarchitectural business, 40% relate directly to her window treatment business, and the remainder are corpo-rate overhead costs.On the revenues indicated above, Louise gave a 10% discount to Adams in order to lure it away from acompetitor and gave a 5% discount to Elm for advance payment in cash.1. Prepare a customer-cost hierarchy report for Interiors by Louise, using the format in Exhibit 14-6.2. Prepare a customer-profitability analysis for the five customers, using the format in Exhibit 14-4.3. Comment on the results of the preceding reports. What recommendations would you give Louise?Required

Note : Format is assumed since there is no information regarding the format in the given question.

Answered: Adams Betz Chatham $357,380 Dedham Elm…

Principles of Accounting Volume 2

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ISBN:9781947172609

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Chapter5: Process Costing

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Customer-cost hierarchy, customer protability. Louise Newman operates Interiors by Louise, an interior design consulting and window treatment fabrication business. Her business is made up of two different distribution channels, a consulting business in which Louise serves two architecture rms (Adams and Betz) and a commercial window treatment business in which Louise designs and constructs window treatments for three commercial clients (Chatham, Dedham, and Elm). Louise would like to evaluate the protability of her two architecture rm clients and three commercial window treatment clients, as well as evaluate the protability of each of the two channels and the business as a whole. Information about her most recent quarter follow:

Adams
Betz
Chatham
$357,380
Dedham
Elm
Gross revenue
Customer-level costs
$234,000
$188,800
117,200
$147,840
115,720
$73,200
147,000
218,580
57,040
Overhead costs total $340,400. Louise has determined that 25% of her overhead costs relate directly to her
architectural business, 40% relate directly to her window treatment business, and the remainder are corpo-
rate overhead costs.
On the revenues indicated above, Louise gave a 10% discount to Adams in order to lure it away from a
competitor and gave a 5% discount to Elm for advance payment in cash.
1. Prepare a customer-cost hierarchy report for Interiors by Louise, using the format in Exhibit 14-6.
2. Prepare a customer-profitability analysis for the five customers, using the format in Exhibit 14-4.
3. Comment on the results of the preceding reports. What recommendations would you give Louise?
Required

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