E$18-26.$ Customer Profitability Analysis

Leahy Inc. has $10$ customers that account for all of its $$1,472,000$ of net income. Its activity$-$based

costing system is able to assign all costs, except for $$200,000$ 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:

REQUIRED

Prepare a customer profitability profile like the one in Exhibit $18\mathrm{.}3.$

E$18-27.$ Customer Profitability Analysis

Refer to the previous exercise E$18-26$ for Leahy Inc.

REQUIRED

a$.$ If Leahy were to notify customers $3,7,$ and $10$ that it will no longer be able to provide them

services in the future, will that increase company profits by $$355,000?$ Why or why not?

$b.,$ What is the primary benefit of preparing a customer profitability analysis?