5-27 ABC, wholesale, customer profitability. Ames Wholesalers sells furniture items to four department-store chains. Sharon Ames commented, "We apply ABC to determine profit line profitabil ity. 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 pur- chase date and receive a full purchase-price refund. The following data were collected from last year's operations: Chain 1 Chain 2 Chain 3 Chain 4 Gross sales $50,000 $30,000 $100,000 $70,000 Sales returns: Number of items 100 26 60 40 Amount $10,000 $ 5,000 $ 7,000 $ 6,000 Number of orders: Regular 40 150 70 Rush 10 50 10 30 Ames has calculated the following activity rates: Activity Cost Driver Rate Regular order processing $ 20 per regular order Rush order processing 100 per rush order Returned items processing 20 per item Catalogues and customer support 1,000 per customer Required Determine the contribution to profit from each chain last year. Cost of goods sold is 70% of net sales. Comment on your solution 50