Allocation - customer profitability
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Basic Exercise on Customer Profitability
The table below gives sales, product cost, and cost-to-serve data for a company that makes three product lines: L, M, and N. The company has two customer types.
Product L Product M Product N
Sales $300 $600 $2,000
Cost of sales 150 200 1,400
Customer Type 1 Customer Type 2 Total
Product X Sales $150 $ 150 $ 300
Product Y Sales 500 100 600
Product Z Sales 0 2,000 2,000
Cost to serve 200 900 1,100
1. Determine the gross profit margin percentage of sales for each product. Which product is the most profitable?
2. Determine the gross profit margin percentage of sales for each customer type.
3. Determine the cost-to-serve percentage of sales for each customer type.
4. Which customer is the most profitable?
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Solution Summary
The allocation for customer profitability is examined.
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