Our company provides data analysis services. On January 1, 2021, our top management reviewed 2020 results...

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Our company provides data analysis services. On January 1, 2021, our top management reviewed 2020 results and 2021 budgets. One surprise was that, in spite of increasing revenues, our budgeted 2021 profit of $1,300,000 was approximately 12% lower than the actual 2020 profit. Our top management decided to examine individual profitability of our clients, slightly extending our absorption costing system. The absorption costing system estimates margins on individual projects we do for clients; all indirect costs are allocated to the individual projects using project revenue as the allocation base. To estimate 2021 client profitability, we added the margins of every project we expected to deliver to a client. This was a straightforward analysis, as in 2021 we expected to have only five clients. This provided the amount of estimated 2021 client profitability. We then produced the Pareto chart below. Note that estimated client profitability amounts are provided for each client except client SP. For example, the Pareto Chart shows that client AMT's estimated 2021 profit is $852,600. Estimated 2021 Client Profitabitlity Pareto Chart $852,600 AMT $588,900 MAC $505,400 PEL ($138,600) AF SP What is estimated client profitability of client SP? To get credit, you must provide computational and conceptual support for your answer (it is not sufficient to extrapolate the amount from the horizontal lines on the graph, as the graph is not drawn to scale). Our company provides data analysis services. On January 1, 2021, our top management reviewed 2020 results and 2021 budgets. One surprise was that, in spite of increasing revenues, our budgeted 2021 profit of $1,300,000 was approximately 12% lower than the actual 2020 profit. Our top management decided to examine individual profitability of our clients, slightly extending our absorption costing system. The absorption costing system estimates margins on individual projects we do for clients; all indirect costs are allocated to the individual projects using project revenue as the allocation base. To estimate 2021 client profitability, we added the margins of every project we expected to deliver to a client. This was a straightforward analysis, as in 2021 we expected to have only five clients. This provided the amount of estimated 2021 client profitability. We then produced the Pareto chart below. Note that estimated client profitability amounts are provided for each client except client SP. For example, the Pareto Chart shows that client AMT's estimated 2021 profit is $852,600. Estimated 2021 Client Profitabitlity Pareto Chart $852,600 AMT $588,900 MAC $505,400 PEL ($138,600) AF SP What is estimated client profitability of client SP? To get credit, you must provide computational and conceptual support for your answer (it is not sufficient to extrapolate the amount from the horizontal lines on the graph, as the graph is not drawn to scale).

Answer rating: 100% (QA)

Estimating Client SPs Profitability While the Pareto chart doesnt provide the exact value for client SPs profitabilitywe can estimate it using the fol... View the full answer