ABC, wholesale, customer profitability Ramirez Wholesalers operates at capacity and sells furniture items to four department-store chains (customers). Mr. Ramirez commented, "We apply ABC to determine product-line profitability. The same ideas apply to customer profitability, and we should find out our customer profitability as well." Ramirez Wholesalers sends catalogs to corporate purchasing departments on a monthly basis. The customers are entitled to return unsold merchandise within a six-month period from the purchase date and receive a full purchase price refund. The following data were collected from last year's operations:

Ramirez has calculated the following activity rates:Activity Cost-Driver RateRegular order processing $25 per regular orderRush order processing $125 per rush orderReturned items processing $15 per itemCatalogs and customer support $1,100 per customerCustomers pay the transportation costs. The cost of goods sold averages 70% of sales.RequiredDetermine the contribution to profit from each chain last year. Comment on yoursolution.

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Chain 3 4 Gross sales $55,000 $25,000 S100,000 S75,000 Sales returns: Number of items 101 25 65 35 $11,000 $ 3,500 S 7,000 $ 6,500 Amount Number of orders: Regular 45 175 52 75 Rush 11 48 11 32