1. Customer Decision. The following customer segmented quarterly income statement is for Cortez Law Services LLC Customers Sanchez $300,000 250,000 $ 50,000 15,000 6,000 $ 29,000 Nguyen $1,500,000 1,200,000 300,000 315,000 Decker $200,000 160,000 $ 40,000 10,000 4,000 $ 26,000 Total Sales revenue Variable costs Contribution margin Direct fixed costs Allocated fixed costs Profit (loss) $2,000,000 1,610,000 $ 390,000 340,000 40,000 $ 10,000 30,000 $ (45,000) Management is concerned about the significant losses associated with the Nguyen account and would like to drop this customer. Allocated fixed costs are assigned to customers based on sales revenue. If Nguyen is dropped, total allocated fixed costs are assigned to the remaining customers, and all variable and direct fixed costs for the Nguyen account will be eliminated. Required a. Perform differential analysis using the format presented in Figure 7.10. Assume keeping all customers is Alternative 1, and dropping the Nguyen account is Alternative 2 b. Which alternative is best? Explain. c. Summarize the result of dropping the Nguyen account using the format presented in Figure 7.12. d. Explain what happened to the profitability of the other two customers as a result of dropping the Nguyen account. 41. Customer Decision a. Alternative 1 (Keep all customers) Customers Sanchez uvell Nguyen Decker Total Sales revenue Variable costs Contribution margin Direct fixed costs Allocated fixed costs Profit (loss) S 10,000 Alternative 2 (Drop Nguyen account) Customers Sanchez Decker Total Sales revenue Variable costs Contribution margin Direct fixed costs Allocated fixed costs Profit Differential Analvsis (Keep all customers) (Drop Nguyen account) Alternative1 Alternative 2 Differential Alternative 1 Total Total Amount is: Sales revenue Variable costs Contribution margin Direct fixed costs Allocated fixed costs Profit (loss) $ 10,000 41. Customer Decision (continued) C. Result of Dropping Nguyen Account d