Customer-cost hierarchy, customer profitability.Denise Nelson operates Interiors by Denise, an interior design consulting and window treatment fabrication business. Her business is made up of two different distribution channels, a consulting business in which Denise serves two architecture firms (Attractive Abodes and Better Buildings) and a commercial window treatment business in which Denise designs and constructs window treatments for three commercial clients (Cheery Curtains, Delightful Drapes, and Elegant Extras). Denise would like to evaluate the profitability of her two architecture firm clients and three commercial window treatment clients, as well as evaluate the profitability of each of the two channels and the business as a whole. Information about her most recent quarter follow:

Gross revenue from Attractive Abodes (AA)	$117,000
Gross revenue from Better Buildings (BB)	94,400
Gross revenue from Cheery Curtains (CC)	178,690
Gross revenue from Delightful Drapes (DD)	73,920
Gross revenue from Elegant Extras (EE)	36,600
Costs specific to AA	73,500
Costs specific to BB	58,600
Costs specific to CC	109,290
Costs specific to DD	57,860
Costs specific to EE	28,520
Overhead costa	170,200

^aDenise has determined that 25% of her overhead costs relate directly to her architectural business, 40% relate directly to her window treatment business, and the remainder are general in nature.

On the revenues indicated above, Denise gave a 10% discount to Attractive Abodes in order to lure it away from a competitor and gave a 5% discount to Elegant Extras for advance payment in cash.

Required

• 1.Prepare a customer-cost hierarchy report for Interiors by Denise, using the format inExhibit 14-6.
• 2.Prepare a customer-profitability analysis for the five customers, using the format inExhibit 14-4.
• 3.Comment on the results of the preceding reports. What recommendations would you give Denise?