Elle Mosk, CEO of X-Space Industries, decided to expand the company's product offering beyond the core model rocket business After Investigation, she decided to set up a separate division to design and manufacture products for the drone market. Several companies were interested in having X-Space develop these drones, and financial results, to date, have been encouraging Revenue was $4 million, gross margins have been running about 40%, and the customer sales and support costs were $1 million. However, there is a growing concern that some customers require a disproportionate share of the sales and support resources, and the true profitability of the customers is unknown. Data were collected to support an analysis of customer profitability Activity Cost Driver Total cost Sales visits Sales visit days $ 450,000 Product modifications Number of modifications 266,000 Number of minutes 92,600 E.mail/electronic communications Number of communications 168.000 $ 1,096, 600 Phone calls Customer A B D E Totals Revenue $ 194,000 494,000 594,000 1,660,000 11,440,000 $3,982,000 Gross Profit Visit Days Modifications $ 144,000 15 15 194,000 25 15 224,000 40 40 414,000 ge 60 584,000 1ee 70 $1,560,000 270 200 Phone Minutes 1,090 1,180 1,430 1,780 2.150 7,660 Electronic Comunications 625 075 1,060 2,860 2,310 6,930 Required: 1 Management felt the easiest way to allocate the sales and support costs was based on the total revenue. Using total revenue as the allocation base, determine the profitability of each of the five customers, 2. Management felt that because the data revealed some customers require a disproportionate share of sales and support resources, activity based costing should be used to determine customer profitability, Use ABC to prepare a customer profitability analysis Complete this question by entering your answers in the tabs below. Required 1 Required 2 Management felt the easiest way to allocate the sales and support costs was based on the total revenue. Using total revenue as the allocation base, determine the profitability of each of the five customers. (Round your intermediate calculations and final answers to 2 decimal places. For percentages.1234 - 12.34%.) Share of Customer Gross Profit Support Costs Profit After Based on Support Costs Pronts Revenue A $ 144.000 B 194000 % C 224.000 % D 414.000 E 584 000 Totals 5 1.560,000 5 0.005 000 Required 1 Required 2 Management felt that because the data revealed some customers require a disproportionate share of sales and support resources, activity-based costing should be used to determine customer profitability. Use ABC to prepare a customer profitability analysis. (Round your intermediate calculations and final answers to 2 decimal places. For percentages 1234 = 12.34%.) Show less Customer Gross Profit ABC Costs Net Profit After Support Costs Net Profit A S % B c 144,000 194.000 224 000 414,000 584,000 1.560,000 96 %6 % D E $ % Totals S S 0.00 $ 0.00
