Customer Profitability Analysis Gonalong, Inc. has 10 customers that account for all of its $4,200,000 of net income. Its activity-based costing system is able to assign all costs, except for $650,000 of general administrative costs, to key activities incurred in connection with serving its customers. A customer profitability analysis based on activity costing produced the following customer profits and losses: Customer #1 $ 306,000 #2 624,000 #3 (257,000) #4 909,000 #5 950,000 #6 872,000 #7 598,000 #8 322,000 #9 (105,000) #10 631,000 Total $ 4,850,000 (a) Using the customer profitability analysis provided in the exercise to calculate the following profits. (i) Calculate the total profits from the 3 most profitable customers Answer (ii) Calculate the total profits for the 5 most profitable customers Answer (iii) Calculate the total profits for the 8 most profitable customers Answer (iv) Calculate the total profits for the 9 most profitable customers Answer (b) Dropping customers 3 and 9 would not necessarily result in an increase in profits of $362,000. Answer (c) Customer profitability analysis helps management to determine whether some customers are unprofitable, and whether the customers that produce the most sales revenue are producing the most profits. Answer Check