ABC Corporation manufactures cooling system components. The company has gathered the following information about two of its customers: Evans Equipment and Rogers Refrigeration.

Evans Equipment Rogers Refrigeration

Sales revenue $215,000 $154,000

Cost of goods sold 95,000 68,000

General selling costs 30,000 21,500

Gen.eral administrative costs 21,000 15,050

Cost-driver data used by the firm and traceable to Evans and Rogers are:

Customer Activity Cost Driver Pool Rate

Sales activity Sales visits $900

Order taking Sales orders 250

Special handling Units handled 30

Special shipping Shipments 600

Customer Activity Evans Equipment Rogers Refrigeration

Sales activity 8 visits 5 visits

Order taking 17 orders 22 orders

Special handling 600 units 550 units

Special shipping 19 shipments 30 shipments

Required:

A. Perform a customer profitability analysis for ABC. Compute the gross margin and operating income on transactions related to Evans Equipment and Rogers Refrigeration.

B. Compute gross margin as a percentage of sales revenue. Then compute (1) general selling and administrative costs as a percentage of gross margin and (2) total

customer-related costs (i.e., costs that arise from sales visits, order taking, and special handling and shipping) as a percentage of gross margin.

C. On the basis of your calculations, which of the two customers is "more costly" to deal with? Briefly explain.