After investigation, she decided to set up a separate division to design and manufacture products for the drone market. Several companies were interested in having X-Space develop these drones, and financial results, to date, have been encouraging. Revenue was $4 million, gross margins have been running about 40%, and the customer sales and support costs were $1 million. However, there is a growing concern that some customers require a disproportionate share of the sales and support resources, and the true profitability of the customers is unknown. Data were collected to support an analysis of customer profitability: Activity Sales visits Product modifications Phone calls E-mail/electronic communications Cost Driver Sales visit days Number of modifications Number of minutes Number of communications Total Cost $ 490,000 274,000 93,400 176,000 $ 1,033,400 Phone Electronic Visit Customer Revenue Gross Profit Days Modifications Minutes Communications A $ 404,000 $ 154,000 15 15 1,170 625 B 504,000 204,000 25 15 1,260 875 C 604,000 234,000 40 40 1,510 1,140 D 1,140,000 424,000 90 60 1,860 2,140 E 1,540,000 594,000 100 70 2,260 2,390 Totals $4,192,000 $1,610,000 270 200 8,060 7,170 Required: 1. Management felt the easiest way to allocate the sales and support costs was based on the total revenue. Using total revenue as the allocation base, determine the profitability of each of the five customers. 2. Management felt that because the data revealed some customers require a disproportionate share of sales and support resources, activity-based costing should be used to determine customer profitability. Use ABC to prepare a customer profitability analysis.