Ames Wholesalers sells furniture items to four department-store chains. Mr. Ames commented, "We apply ABC to determine profit line profitability. The same ideas apply to customer profitability, and we should find out our customer profitability as well." Ames Wholesalers sends catalogues to the 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:

Ames has calculated the following activity rates:
ActivityCost Driver Rate
Regular order processing ...........$20 per regular order
Rush order processing............ $100 per rush order
Returned items processing .......... $10 per item
Catalogues and customer support ....... $1,000 per customer
REQUIRED

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Chain 1 S50,000 100 Chain 2 $30,000 26 Chain 3 100,000 60 Chain 4 $70,000 Gross sales Sales returns Number of items Amount 40 $10,000 5,000 $7,000 6,000 Number of orders Regular Rush 40 10 70 30 150 50 10 50