Question
Carmel Company has a frequent buyer program for its customers, where the customers can attain an elite level based on the number of orders and
Carmel Company has a frequent buyer program for its customers, where the customers can attain an elite level based on the number of orders and the total revenue of the orders. There are two elite levels: Platinum and Titanium. The benefits of elite membership include discounts and access to special customer service representatives who can resolve problems. The company has one full-time customer representative per 200 Titanium customers and one full-time customer representative per 2,000 Platinum customers. Customer representatives receive salaries plus bonuses of 1 percent of customer gross margin. Carmel spends 90 percent of its promotion costs on Titanium customers to encourage their loyalty.
Customer Costs | Total | Titanium | Platinum | ||||||
Number of customers | 28,000 | 6,000 | 22,000 | ||||||
Average customer representative salary | $ | 79,000 | $ | 79,000 | |||||
Promotion costs | $ | 1,600,000 | |||||||
Average gross margin per customer | $ | 1,700 | $ | 380 | |||||
Required:
a. Calculate the totals of the items below for both titanium and platinum customers, as well as the excess of gross margin over customer costs for each category.
Titanium? Platinum?
Total Gross Margin?
Customer Representative Salaries and Bonuses?
Promotion Costs?
Excess of Gross Margin over Customer Cost?
b. Which customers are more profitable?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-text-image.webp)
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-subtext-image.webp)
Step: 3
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-subtext-image.webp)
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started