Ellie 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 Sales visits Product modifications Phone calls E-mail/electronic communications Sales visit days Number of modifications Number of minutes Number of communications Total Cost $ 486,000 260,000 92,000 162,000 $1,000,000 Phone Electronic Customer Revenue Gross Profit visit wys Hodifications Minutes Communications A $ 400,000 $ 150,000 15 15 1,030 625 500,000 200,000 25 15 1,120 875 C 600,000 230,000 40 401 1,370 1,000 D 1,000,000 420,000 90 60 3,720 2,000 E 1,500,000 590,000 200 20 2,120 2,250 Totals $4,000,000 $1,590,000 270 200 7.360 6.750 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. 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. Answer is not complete. Complete this question by entering your answers in the tabs below. Required 1 Required 21 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 "Profit percentage" to 2 decimal places (1..1234 12.34%).) Customer Share of Gross Profit Support Costs Based on Revenue Profit After Support Costs Profit% ABCC $ 150,000 $ 100.000 % $ 200,000 $ 125,000 $ 230,000 $ 150,000 % D $420,000 $ 250,000 E $590,000 S 375,000 % Totals $ 1.590,000 $ 1,000,000 5 0 Required 2 > 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 "Profit percentage" to 2 decimal places (ie. 1234 = 12.34%.).) Customer Gross Profit Share of Support Costs Based on Profit After Support Costs Profit% Revenue A $ 150,000 % B S 200,000 % C $ 230,000 % D S 420,000 96 E $ 590,000 Totals $ 1,590,000 $ 0 $ 0 Required 2 >