Blakely Company makes three product lines and has two customer types. The following table gives sales, product cost, and cost-to-serve data for Blakely:

The cost to serve all customers is $10,000 and is allocated to customer types based on the number of manager visits to customer locations for pre- and post-sales support.

1. Determine the gross profit margin percentage of sales for each product. Which product is the most profitable?

2. Determine the gross profit margin and 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. Determine the operating income and operating income percentage of sales for each customer type.

5. Which customer is the most profitable based the following profitability measures:

a. Gross margin

b. Gross margin percentage of sales

c. Operating income

d. Operating income percentage of sales

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Alpha $4,000 2,000 Customer Type 1 Product Beta $8,000 2,000 Gamma $20,000 14,000 Total S 4,000 Sales Cost of goods sold Product Alpha Sales Product Beta Sales Product Gamma Sales Manager Visits Customer Type 2 $ 2,000 3,000 19,000 S2.000 5,000 8.000 20,000 10