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Customer Profitability Analysis Roland, Inc. provides residential painting services for three home building companies. Alpha, Beta, and Gamma, and it uses a job costing system
Customer Profitability Analysis Roland, Inc. provides residential painting services for three home building companies. Alpha, Beta, and Gamma, and it uses a job costing system for determining the costs for completing each job. The job cost system does not capture any cost incurred by Roland for return touchups and refinishes after the homeowner occupies the home. Roland paints each house on a square footage contract price, which includes painting as well as all refinishes and touchups required after the homes are occupied. Each year. Roland generates about one-third of its total revenues and gross profits from each of the three builders. Roland has observed that the builders, however, require substantially different levels of support following the completion of jobs. The following data have been gathered: Assuming that each of the three customers produces gross profits of $100,000, calculate the profitability from each builder after taking into account the support activity required for each builder. Alpha $ Beta $ Gamma $ Which of the following is not a reasonable action for Roland to consider as a result of his analysis? sharing some of these data with the Alpha Company to demonstrate to them that they are not in line with the other builder/customers in terms of the level of support required. If Alpha cannot be brought in line, Roland may consider replacing Alpha, possibly by seeking another builder as a third customer. Seek to make improve the efficiency of its activities and lower the cost of each activity performed in support of Alpha. Inform Alpha that if it does not come into line with other customers, it will be discontinued as a customer. None of the above
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